Huge losses hit CTAs hard
According to a recent piece in Bloomberg Markets, mysterious movement in the markets has brought about the worst plunge for CTAs since 2007, punched risk parity funds downward and hit tech stocks hard. As so many quants try to mitigate these losses, there is a danger that a further selloff will just exacerbate the damage.
Co-founder of Greenline Partners LLC and Desautels Global Expert Maneesh Shanbhag says that CTAs will ride market trends, and that “connecting that to risk parity, the more basic idea will not cause instability in markets. But a levered risk parity strategy is at risk of all assets failing.â€
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