Gundlach Warns Market Moves Bad for Risk-Parity Hedge Funds
(Bloomberg) -- The slump in U.S. stocks and muted rebound in Treasuries spells bad news for risk parity funds, according to Jeffrey Gundlach, chief investment officer of DoubleLine Capital.
A 6.5 percent decline in the S&P 500 Index from its September high, coupled with a less than four basis point drop in the benchmark 10-year Treasury yield was bad for the popular hedge fund strategy, the bond manager said in a Twitter post after U.S. markets closed Tuesday.
The S&P Multi-Asset Risk Parity Index, one measure of the strategy, has underperformed a traditional 60/40 equity/bonds allocation this year, according Bloomberg calculations. The gauge has fallen 1.5 percent versus a 0.6 percent rise in a basket comprised of the S&P 500 Index and the Bloomberg Barclays U.S. Treasury Total Return Index, the data show.
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