ÿþ<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"> <html> <head> <title>AQR Capital</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> <META NAME="TITLE" CONTENT="AQR Capital"> <META NAME="AUTHOR" CONTENT="XCELLENCEIT"> <META NAME="COPYRIGHT" CONTENT="XCELLENCEIT"> <META NAME="KEYWORDS" CONTENT="AQR, CAPITAL"> <META NAME="DESCRIPTION" CONTENT="AQR, CAPITAL, NEWS, INFO"> <META NAME="GENERATOR" CONTENT="crimson"> <META NAME="ROBOTS" CONTENT="index"> <link href="layout/css/default.css" rel="stylesheet" type="text/css"> </head> <body bgcolor="#DCDFE6"> <table width="100%" height="100%" border="0" cellspacing="0" cellpadding="0"> <tr> <td align="center" valign="middle"> <table border="0" cellspacing="0" cellpadding="0" height="100%"> <tr> <td align="right" valign="bottom"><img src="layout/bara_sus1.jpg" width="7" height="7"></td> <td class="top">&nbsp; </td> <td align="left" valign="bottom"><img src="layout/bara_sus2.jpg" width="7" height="7"></td> </tr> <tr> <td width="12" class="left" rowspan="4">&nbsp; </td> <td width="776" height="107" background="layout/en/header1.gif">&nbsp; </td> <td width="13" class="right" rowspan="4">&nbsp; </td> </tr> <tr> </tr> <tr> <td width="776" height="100%"><table border="0" cellspacing="0" cellpadding="0" height="100%"> <tr height="5" bgcolor="#d7def1"><td colspan="3">&nbsp; </td> </tr> <tr> <td align="center" colspan="2"> <img src="layout/en/rb_15iun_04.jpg" border="0" width="776" height="64" alt="research"> </td> </tr> <tr> <!-- the following bgcolor is the left menu column original color was #f0f0f0 !--> <td width="220" height="100%" valign="top" bgcolor="#e5e5e5"> <ul style="list-style:none;padding-top:30px"> <li class="space"><a href="home.htm" class="leftmenblu" >HOME</a> </li> <li class="space"><a href="about.htm" class="leftmenblu" >ABOUT AQR</a> </li> <!--<li class="space"><a href="http://www.google.com" class="leftmenred" >Search Google</a></li>--> <li class="space"><a href="principal_bios.htm" class="leftmenblu" >PRINCIPAL BIOS</a> </li> <li class="space"><a href="research.htm" class="leftmenred" >RESEARCH LIBRARY</a> <li class="space"><a href="RecruitingHome.htm" class="leftmenblu" >CAREER OPPORTUNITIES </a> </li> </li> <li class="space"><a href="legal.htm" class="leftmenblu" >LEGAL </a> </li> <li class="space"><a href="contact.aspx" class="leftmenblu" >CONTACT US</a> </li> <li class="space"><a href="directions.htm" class="leftmenblu" >DIRECTIONS</a> </li> </ul></td> <td width="556" height="100%" bgcolor="white" valign="top"> <table cellpading=0 cellspacing=0 border=0><tr><td style="padding:25px;" valign="top"> <span class="titlu_negru"> <font size="3" color="black" type="">Understanding Risk Parity</font> </span> <br /> <span> <font size="2" color="black" type="">So, You Think You re Diversified...</font> </span> <br /><br /><br /> <!--span class="titlu_albastru">Summary</span><br /><br /--> <span class="scris_gri"> The outperformance of Risk Parity strategies during the recent credit crisis has confirmed the benefits of a truly diversified portfolio. Traditional diversification focuses on dollar allocation; but because equities have disproportionate risk, a traditional portfolio s overall risk is often dominated by its equity portion. Risk Parity diversification focuses on risk allocation. We find that by making significant investments in non-equity asset classes, investors can achieve true diversification  and expect more consistent performance across the spectrum of potential economic environments.<br /><br /> First, the paper highlights the concentration risk embedded in traditional portfolios, and explains the intuition behind Risk Parity. Next, we describe a Simple Risk Parity Strategy and demonstrate its consistent outperformance over nearly 40 years of historical data. Finally, we delve into the more advanced portfolio construction and risk management techniques used to implement actual Risk Parity portfolios.<br /><br /> </span><br /><br /><b><font color="black">For a copy of this paper, please click here: </font><a href="contact.aspx?link_id=18" class="download_link">Understanding Risk Parity</a><br /></b></td></tr></table> </td> </tr> <tr bgcolor="#d7def1" height="15"><td colspan="2">&nbsp; </td></tr></table></td></tr> <tr> <td bgcolor="#b0b3ba" style="padding-top:2px;padding-right:10px;" align="right" valign="top"> <a href="home.htm" class="white">HOME</a><font color="white">|</font> <a href="about.htm" class="white">ABOUT AQR</a><font color="white">|</font> <a href="principal_bios.htm" class="white">PRINCIPAL BIOS</a><font color="white">|</font> <a href="research.htm" class="white">RESEARCH LIBRARY</a><font color="white">|</font> <a href="RecruitingHome.htm" class="white">CAREER OPPORTUNITIES </a><font color="white">|</font> <a href="contact.aspx" class="white">CONTACT US</a><font color="white">|</font> <a href="directions.htm" class="white">DIRECTIONS</a></td> </tr> <tr> <td align="right" valign="top"><img src="layout/bara_sus3.jpg" width="7" height="7"></td> <td align="right" style="padding-right:20px;" class="copyright1">2004 &copy; AQRCapital.com. 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