Exhibit 1: Volatility of Market Return
It has been said many times that diversification is the only free lunch in investment management. In other words, investors can structure a portfolio with multiple non-correlated assets that accrues a smoother, lower volatility stream of ‘market’ returns— the blue line in Exhibit 1
Historically and typically this has been accomplished with a capital allocation approach like a 60/40 equity/bond portfolio.
AGAWA believes an investor can accrue a comparable market return with less risk and low correlation to that typical capital allocation strategy, by focussing on risk allocation and by explicitly considering the economic factors that drive asset class returns.
AGAWA’s portfolio approach is modeled on the pioneering work of Bridgewater Associates. Bridgewater was the first fund manager to create a risk-balanced portfolio using risk-parity and has a successful track record dating back to 1996. A 20+ year relationship between AGAWA’s founders and Bridgewater Associates has culminated with these important portfolio construction techniques and Bridgewater’s alpha insights now being more widely available to sophisticated Canadian investors through an investment in AGAWA’s Fund I.
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