EUROPE – Aquila Capital has launched a risk parity bond fund with which it hopes to attract investors to fixed income despite the surrounding concern over increases to interest rates.
The strategy for the alternative asset manager's risk parity bond fund will see it invest in a range of corporate and government bonds, as well as index-linked paper and emerging market carry positions.
Torsten von Bartenwerffer, the senior portfolio manager at Aquila responsible for the fund, said it aimed to offer long-term, stable returns "irrespective of market conditions".
"Capital is allocated based on the risk an asset contributes to the portfolio rather than predicted returns, and market timing plays no role at all," von Bartenwerffer said.
"Instead, the strategy focuses on managing uncertainty through effective diversification between assets that have no correlation to each other and that have various correlations to different phases of the economic and fixed income cycles."
He added that the fund's sub-asset classes aimed to counteract any losses that might occur in other parts of the portfolio.
Stuart McDonald, managing director at Aquila, argued that there would continue to be a desire for fixed income "by regulation or desire".
He added: "At a time when the outlook for fixed income is uncertain, our strategy offers fixed income investors a truly diversified and liquid counterbalance to their existing exposures, which may be perceived as vulnerable should fixed income markets reverse."
The Luxembourg-registered AC Risk Parity Bond UCITS will target a return of 3% above cash, with an annualised volatility of 3%, the manager added.