Salient Partners Debuts Industry-First Risk Parity Index New Index Provides a Benchmark for the Performance of Risk-Parity Strategies
HOUSTON, Feb. 16, 2012 /PRNewswire/ -- Salient Partners L.P. (Salient), a $16 billion asset management firm, is today launching the Salient Risk Parity Index™. This first-of-its kind benchmark will enable investment managers to measure the performance and effectiveness of their risk-parity strategies against an industry standard, passive index.
Based on performance derived by Indxis, the third-party calculation agent for the Salient Risk Parity Index, the Index is shown to have generated returns greater than 10% in 13 of the 22 years since 1990 and suffered only three losing years: 1994 (-1.3%), 2001 (-10.7%), and 2008 (-9.2%). The compounded annual rate of return for the 22 year period was 11.1%. In contrast, a typical portfolio of 60% equities and 40% bonds produced compound annual returns of 6% over the same period and suffered a loss of more than 25% in 2008.
"The Salient Risk Parity Index has been created to fill what we see as a void in the money management arena," said Lee Partridge, Chief Investment Officer of Salient. "While equity strategists and stock fund managers can gauge their performance against indices such as the Dow Jones Industrial Average and S&P 500, investment managers who employ risk-parity strategies do not have a similar measurement tool. With risk-parity strategies becoming more prevalent in the marketplace, we feel investment managers need a daily benchmark that allows them to evaluate the effectiveness of their approach."
The Salient Risk Parity Index seeks to represent the performance of an equally risk-weighted allocation to global equity, interest rate, credit and commodity futures contracts and swaps. One-quarter of the Index's variance comes from each of the four asset classes and portfolio weights are rebalanced monthly.
The volatility target of the Salient Risk Parity Index is 10%, which is approximately equal to the long-run annual standard deviation of a typical portfolio asset allocation consisting of 60% equities and 40% debt. The Index is intended to represent a practical opportunity set of investments that encompasses the global investment market. Assets are selected by Salient's Index Committee from the universe of investable futures and standardized credit default swap indices with an emphasis on breadth and liquidity.
"Our analysis shows that the risk-parity strategy represented by the Index does quite well historically compared to more conventional allocation approaches," Mr. Partridge said. "Traditionally, investors seeking higher returns have increased their equity concentration. Risk-parity offers an alternative to this approach by allowing investors to target a specific level of risk which is sourced equally across asset classes. As you can see from the historical performance, The Salient Risk Parity Index exhibits fairly consistent year-to-year returns and an attractive risk-return tradeoff."
To view the Salient Risk Parity Index, please go to www.theriskparityindex.com
For more information about the Salient Risk Parity Index or Salient, please contact Chris Moon of JCPR at 973-850-7304 or firstname.lastname@example.org.
About Salient Partners L.P.
Salient Partners L.P. is a $16 billion investment management firm based in Houston, Texas. The firm is a recognized innovator in the development, management and delivery of sophisticated, non-traditional investment solutions for both institutional and retail investors. Through its comprehensive investment approach, Salient identifies and develops leading strategies that help eliminate unrewarded risk, reduce investing costs and focus on the fundamental drivers of returns to deliver the full potential of all markets to investors. For more information about Salient and its professionals, visit www.salientpartners.com.
Contact: Chris Moon
SOURCE Salient Partners L.P.