The SGI US Risk Parity Momentum 2014 Index is a rules-based index providing access to a multi-asset allocation within a basket of ETFs based on both a risk budgeting model (the Equal-Risk Contribution methodology) and a momentum filter.
The index aims to provide stable performance during bullish periods and to mitigate drawdowns during bearish periods through risk and asset diversification, while maintaining volatility near a predefined level.
The SGI US Risk Parity Momentum Index is based on the combination of a risk budgeting model (ERC Equal Risk Contributions methodology) and a trend following mechanism, which provides the optimal weighting for each asset within the portfolio on a monthly basis. To determine the allocation the quantitative model follows three steps:
- A strategic allocation thanks to ERC that ensures each Component contributes a relatively equal amount of risk to the Basket- A tactical allocation thanks to a trend following in order to benefit from positive trends - Maintain volatility near a predefined level of 6%, thanks to a volatility target mechanism