Thursday, June 27, 2013

How One Hedge Fund Strategy Is Like The Steve Carell Character In Every Movie




Certain hedge funds have been employing an investment strategy known as risk parity, which is safe, measured, cautious. Not unlike most of the movie characters played by Steve Carell.  Hedge funds such as AQR, Invesco, and Bridgewater Associates, which ranks as the world’s largest hedge fund, have been struggling lately. The problem, according to experts, is that these funds all employ an investment strategy known as risk parity, which can best be explained through Steve Carell’s most memorable movie roles.

“The Forty-Year-Old Virgin”  The Role: Carell plays Andy Stitzer, an involuntarily celibate 40-year-old virgin who has always lived a simple, straightedge lifestyle. He has trouble meeting women, despite the best efforts of his friends and encouragement of those around him. Carell’s character is so cautious he has trouble with women even in situations where opportunities are seemingly handed to him.
The Connection: Risk parity involves spreading risk around a portfolio evenly and proportionately based on the riskiness of an asset class. In other words, it’s always making sure to operate with a measured approach and extreme caution. Perhaps too much caution — the kind that can make you miss out on life experiences…


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