Salient

The Salient Risk Parity Index represents a quantitatively driven global asset allocation framework with the goal of equally weighting risk across four major asset classes (equities, commodities, rates, and credit). The Index is calculated daily, rebalanced monthly, and targets a 10% volatility level.

On March 3, 2014 Salient Index Management, LLC assumed daily calculations of the Salient Risk Parity Index. Additionally, the index restated its performance calculations on March 3, 2014 retrospectively to January 1, 1990. These modifications took place so the index can more accurately reflect roll yield, the return generated from rolling short-term futures contracts into longer-term contracts.

On March 3, 2014, the Salient Risk Parity Index reconstituted its underlying holdings with the addition of new equity futures contracts. As a result of the screens and analysis undertaken by the Index Management Committee, the following contracts were added to the index effective March 3, 2014: BOVESPA, Amsterdam Index and MSCI Singapore. Historical prices have not been altered to reflect the inclusion of the aforementioned contracts. 

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

CURRENT INDEX VALUE
As of
1-Day
MTD
QTD
YTD
1-YR
3 YR1
5 YR1
ITD2
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2014 1.67% 6.22% 1.26% 2.07% 2.72% 2.93% -1.96% 2.71% -5.63% 2.32% 1.04%   15.94%
2013 0.00% 1.06% 2.14% 4.36% -5.37% -5.87% 2.80% -0.85% 3.28% 2.96% -0.82% -0.90% 2.22%
2012 4.27% 0.96% -2.03% 1.47% 0.05% 2.55% 3.43% 1.11% 2.82% -0.94% 2.74% 0.38% 17.95%
2011 -0.14% 1.23% 0.50% 3.02% 0.77% -0.52% 4.16% -0.48% -3.69% 4.58% -0.92% 2.68% 11.43%
2010 -0.18% 1.27% 1.03% 1.87% -0.86% 1.78% 3.25% 2.66% 2.59% 0.71% -2.90% 2.63% 14.56%
2009 -5.02% -2.12% 3.53% 2.34% 2.23% 0.76% 3.53% 1.29% 2.46% 0.06% 3.21% -0.48% 12.04%
2008 0.95% 5.75% -2.07% -0.51% -2.10% -1.51% 0.03% 1.09% -8.54% -14.80% 3.19% 4.41% -14.85%
2007 -0.74% 2.90% 0.01% 0.99% -0.43% -1.32% 3.37% 1.34% 3.88% 3.10% 0.29% 0.14% 14.21%
2006 3.13% -1.67% -0.40% 0.82% -1.66% -0.39% 1.95% 4.45% 0.40% 2.77% 3.80% -2.18% 11.27%
2005 0.57% 2.63% 0.84% -0.92% 3.29% 2.81% 1.81% 2.98% 1.24% -4.22% 4.19% 3.83% 20.46%
2004 2.16% 5.70% 0.25% -5.09% 0.35% -0.84% 1.06% 3.68% 3.88% 1.27% 3.67% 1.65% 18.76%
2003 2.38% 0.95% -4.47% 2.72% 6.86% -0.30% -0.28% 2.35% 2.44% 2.59% 0.80% 6.44% 24.35%
2002 -0.78% 1.72% 2.73% -0.41% 0.79% 0.78% -0.67% 3.78% 0.54% 1.62% 1.53% 2.68% 15.15%
2001 2.30% -2.19% -5.92% 1.41% -1.45% -2.38% 0.28% -0.46% -7.63% 2.00% 2.52% -1.29% -12.59%
2000 -1.34% 0.69% 4.88% -1.88% 3.26% 1.70% 1.04% 3.36% -1.24% -2.47% 2.91% 2.58% 14.00%
1999 0.47% -4.59% 5.04% 3.31% -4.61% 1.91% -1.53% 2.22% 1.12% -0.80% 2.58% 2.35% 7.19%
1998 2.04% 0.49% 2.94% -0.82% -1.41% -0.97% -1.79% -6.74% 8.48% 1.15% -1.14% -3.36% -1.86%
1997 0.52% 2.90% -1.66% 1.40% 4.43% 1.21% 4.33% -2.89% 5.62% -4.82% -1.56% -0.77% 8.48%
1996 3.27% -1.00% 1.82% 2.16% 0.67% -1.14% -0.75% 4.21% 3.18% 1.67% 6.27% -1.16% 20.61%
1995 -2.23% 4.53% 3.19% 2.46% 5.11% 0.05% 1.47% 2.49% 2.20% 0.59% 4.01% 3.16% 30.33%
1994 3.92% -5.05% -4.87% -0.05% 1.90% -4.19% 4.45% 0.10% -3.12% 0.73% 0.84% 2.45% -3.46%
1993 0.70% 7.13% 3.94% 0.17% -0.08% 2.68% 7.82% 1.79% -1.59% 3.30% -2.00% 6.64% 34.39%
1992 -1.39% 0.29% -1.67% 2.36% 3.80% 1.00% 2.76% -3.72% 2.74% 0.63% -0.72% 2.79% 8.95%
1991 -0.39% 3.85% 0.82% 0.41% 0.91% -3.37% 5.10% 2.10% 2.89% 1.70% -2.72% 1.91% 13.68%
1990 -4.78% -1.50% -2.56% -2.65% 5.94% -0.58% 1.49% -2.37% 2.56% 0.56% 3.77% 1.06% 0.43%
1 Returns are annualized.

2 The inception date used for this calculation is January 1, 1990.

The Salient Risk Parity Index represents hypothetical performance since the index does not reflect any particular investment program and may, therefore, have certain limitations, some of which are described below. Since this is index performance, it does not represent the performance of any investment account or the results of actual trading, and no representation is being made that any account using the Index as a benchmark will experience performance similar to the Index’s performance. In fact, it is not uncommon for investment programs targeting a particular index to have performance that diverges materially from the performance of the relevant index. In addition, hypothetical performance does not involve financial risk, and no hypothetical performance record can completely account for the impact of financial risk that exists in an investment program that is actually trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other facts related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. All figures are based on current information and may be changed, suspended, or withdrawn as a result of changes in or unavailability of data, or other circumstances. The performance data herein are calculated based on data believed to be reliable and to be reasonable. The information herein has not been audited. Nothing on this website is intended to convey legal, tax, securities, financial or investment advice, nor an opinion in regards to the appropriateness of any investment. Salient is not liable for any loss arising from the use of this material.

The Index has been retrospectively calculated and did not exist prior to January 2012. Accordingly, the index performance shown for periods prior to January 2012 has been developed with the benefit of hindsight. Certain futures contracts and credit default swap instruments comprising the underlying asset classes were not available at inception of the retrospective Index performance calculation beginning in January 1, 1990. Futures contracts unavailable at Index inception were included in the underlying asset classes as available. Credit default swaps comprising the Global Credit asset class were included beginning February 2009. Past performance is not necessarily indicative of how the Index will perform in the future. Index performance does not reflect the deduction of fees or expenses. Note that an investor cannot invest directly in the Index.

On March 3, 2014 Salient Index Management, LLC assumed daily calculations of the Salient Risk Parity Index. Additionally, the index restated its performance calculations on March 3, 2014 retrospectively to January 1, 1990. These modifications took place so the index can more accurately reflect roll yield, the return generated from rolling short-term futures contracts into longer-term contracts.

On March 3, 2014, the Salient Risk Parity Index reconstituted its underlying holdings with the addition of new equity futures contracts. As a result of the screens and analysis undertaken by the Index Management Committee, the following contracts were added to the index effective March 3, 2014: BOVESPA, Amsterdam Index and MSCI Singapore. Historical prices have not been altered to reflect the inclusion of the aforementioned contracts. 

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

As of 10/31/2014
As of 10/31/2014
Asset Class Dollar Allocation Risk Allocation
Equities 33.93% 25.00%
Commodities 56.79% 25.00%
Rates 143.41% 25.00%
Credit 121.56% 25.00%
As of 10/31/2014
The Salient Risk Parity Index is comprised of futures contracts and swaps across four major asset classes (equities, commodities, interest rates and credit). Attribution exhibits are provided in order to demonstrate how the holdings within these asset classes contributed to the Index’s return.

The composition table displays the gross dollar and risk allocation for the Index. The risk allocation is based on statistical measures of volatility and correlation for each of the components of the Index as calculated by Salient Index Management, LLC. These calculations are based on prior returns for each component of the Index with no projections for future returns or volatility. The dollar and risk allocations represent the Index’s starting allocation and risk target at the beginning of the month, and do not reflect the changes in weight that would result from appreciation/depreciation or the amount of volatility that any component actually contributed to the Index over the course of the allocation month.

Data displayed here has been rounded to the nearest tenth for illustrative purposes only. The information presented herein has not been audited and is subject to change without advanced notice.

The Salient Risk Parity Index represents hypothetical performance since the index does not reflect any particular investment program and may, therefore, have certain limitations, some of which are described below. Since this is index performance, it does not represent the performance of any investment account or the results of actual trading, and no representation is being made that any account using the Index as a benchmark will experience performance similar to the Index’s performance. In fact, it is not uncommon for investment programs targeting a particular index to have performance that diverges materially from the performance of the relevant index. In addition, hypothetical performance does not involve financial risk, and no hypothetical performance record can completely account for the impact of financial risk that exists in an investment program that is actually trading.

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

The Salient Risk Parity Index is comprised of an equally risk-weighted portfolio of equities, commodities, global interest rates and credit. It employs 46 futures contracts and 6 credit default swap indices. The Index risk-weights the underlying assets at both the asset class and the sub-asset class level. The Index weights target a 10% standard deviation for the index as a whole, a risk level which is approximately equal to the long-run annual standard deviation of a typical portfolio consisting of 60% equities and 40% debt.

On March 3, 2014 Salient Index Management, LLC assumed daily calculations of the Salient Risk Parity Index. Additionally, the index restated its performance calculations on March 3, 2014 retrospectively to January 1, 1990. These modifications took place so the index can more accurately reflect roll yield, the return generated from rolling short-term futures contracts into longer-term contracts.

On March 3, 2014, the Salient Risk Parity Index reconstituted its underlying holdings with the addition of new equity futures contracts. As a result of the screens and analysis undertaken by the Index Management Committee, the following contracts were added to the index effective March 3, 2014: BOVESPA, Amsterdam Index and MSCI Singapore. Historical prices have not been altered to reflect the inclusion of the aforementioned contracts. 

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

Equities
Commodities
Global Interest Rates
Credit
S&P 500 Index WTI Crude U.S. 10 Yr Treasury Note CDX.NA.IG
S&P Midcap 400 Index Brent Oil Canada 10 Yr Treasury Note iTraxx Europe
RUSSELL 2000 Index Natural Gas Euro 10 Yr Bond CDX.NA.HY
FTSE100 Index Heating Oil U.K. 10 Yr Gilt iTraxx Europe Crossover
CAC40 Index Unleaded Gas Japan 10 Yr Bond CDX.EM
DAX Index Gas Oil (100MT) Australia 10 Yr Bond  
FTSE MIB Index Live Cattle    
IBEX 35 Index Lean Hog    
OMX Index Corn    
Amsterdam Exchange Index Soybean    
Japan Topix Index Sugar    
MSCI Singapore Index Cotton No. 2    
SPI 200 Index Wheat    
BOVESPA Index Coffee    
Hang Seng Index Cocoa    
MSCI Taiwan Index Gold    
South Africa All Share Index Comex Copper    
HSCEI China Index Silver    
SGX CNX Nifty Index Zinc    
KOSPI 200 Index Nickel    
  Lead    
  LME Aluminum    
     
     
     
1The Salient Indices Committee selects, maintains, and reviews the list of futures contracts and credit default swap indices making up the Salient Risk Parity Index and oversees the computation of Index weights for each asset. Underlying index composition is subject to change without advance notice.

On March 3, 2014 Salient Index Management, LLC assumed daily calculations of the Salient Risk Parity Index. Additionally, the index restated its performance calculations on March 3, 2014 retrospectively to January 1, 1990. These modifications took place so the index can more accurately reflect roll yield, the return generated from rolling short-term futures contracts into longer-term contracts.

On March 3, 2014, the Salient Risk Parity Index reconstituted its underlying holdings with the addition of new equity futures contracts. As a result of the screens and analysis undertaken by the Index Management Committee, the following contracts were added to the index effective March 3, 2014: BOVESPA, Amsterdam Index and MSCI Singapore. Historical prices have not been altered to reflect the inclusion of the aforementioned contracts. 

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

A risk parity strategy is one in which each asset class in the portfolio contributes equally to the portfolio's total risk. The Salient Risk Parity Index implements risk parity across four asset classes: global equities, global developed interest rates, global credit and commodities. The index seeks to derive an equal portion of its variance, a statistical measurement of investment risk, from each asset class. By balancing risk equally across each asset class, the index seeks to achieve diversification beyond that of a "standard" 60/40 index composed of 60% stocks and 40% bonds.

To illustrate this point, the figure below plots the total return on stocks, bonds and the 60/40 index. Comparing the 60/40 index to the series representing stocks and bonds, it is clear that the blended portfolio behaves a lot like an all-equity allocation. In fact, from January 2000 to December 2011, 98% of the variance of the 60/40 index came from the equity component. This is in sharp contrast to the equal risk contributions targeted by a risk parity strategy. With the improved diversification of risk parity, investors have the potential to achieve higher returns without increasing risk or to achieve the same level of returns at lower risk.

Stocks dominate the risk profile of the 60/40 index.
Source: Bloomberg, Salient Index Management, LLC as of 02/01/2013.
Past performance is no guarantee of future results.

This index is systematic in nature and represents a quantitatively driven allocation framework. It does not incorporate active management.

Risk Parity is a core allocation framework designed to serve as a diversified foundation.

We define risk as the probability of significant loss of capital. We think that the standard deviation of returns, which is a statistical measure of the average fluctuations of returns over time, is a good approximation for the probability of significant losses. This metric is more commonly referred to as “volatility.” Thus we aim to control risk by targeting constant levels of risk over time. In addition to constant risk over time, we explicitly seek to have each asset or sub-strategy of the Index contribute a pre-determined portion of total portfolio risk.

On March 3, 2014 Salient Index Management, LLC assumed daily calculations of the Salient Risk Parity Index. Additionally, the index restated its performance calculations on March 3, 2014 retrospectively to January 1, 1990. These modifications took place so the index can more accurately reflect roll yield, the return generated from rolling short-term futures contracts into longer-term contracts.

On March 3, 2014, the Salient Risk Parity Index reconstituted its underlying holdings with the addition of new equity futures contracts. As a result of the screens and analysis undertaken by the Index Management Committee, the following contracts were added to the index effective March 3, 2014: BOVESPA, Amsterdam Index and MSCI Singapore. Historical prices have not been altered to reflect the inclusion of the aforementioned contracts. 

The Salient Risk Parity Index is the exclusive property of Salient Index Management, LLC, a subsidiary of Salient Partners, L.P., and is protected by copyright and other intellectual property laws. Salient Index Management, LLC, is responsible for the administration and calculation of the index. It is the responsibility of each web site user to assess and satisfy themselves as to the merits of any of the index and the suitability of any particular index for their purposes. Salient Index Management, LLC is not an investment adviser, and nothing herein contained constitutes financial or investment advice. All data and information is provided for information purposes only. All information has been carefully compiled to ensure maximum accuracy. However, we cannot guarantee and do not guarantee the accuracy of the information/calculations, nor the complete absence of errors and omissions. Any use of this material for the purpose of creating any financial product or service, for any reason, is strictly prohibited unless authorized exclusively in writing by Salient. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services.

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Ashland Partners & Company, LLP, has examined the Salient Risk Parity Index for the periods January 1, 1990 through December 31, 2012; the examination includes testing on a sample basis calculations and methodologies outlined in the following report.