China's sovereign wealth fund is said to slash risk-parity assets by about 50%

Author: Justin Low | Category: News

A sign of the times

According to Bloomberg, China's $941 billion sovereign wealth fund (China Investment Corp) has slashed its risk-parity portfolio by ~50%, according to people familiar with the matter.

Adding that the move is to avoid the recent turmoil that hit all asset classes and that the fund started cutting positions around 10 March and completed the move within a few days. Amid the 'sell everything' mood in the market, risk-parity trades have had a rough time:
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Risk parity
The toxic combo of falling equities and falling bonds was helped out by the ECB last week, and that helped to calm nerves in the bond market before other developments - notably the Fed - also helped to exude further calm in the market in recent days.

But I would say that it may be still be a bit early to say that we have moved past the market panic and distress for good, as the world economy is still seeing a major shutdown with little sense of when things will be getting better just yet.

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