Ai For Alpha releases a new transparent, Ai-Powered futures-based replication of risk-parity benchmarks targeting high correlation, a positive information ratio, and reduced drawdowns.

Ai For Alpha, a leading fintech specializing in AI-driven investment strategies, today announced the release of its latest innovation: the Risk Parity Decoding strategy. The approach uses advanced machine-learning techniques to replicate Risk Parity benchmarks with transparent, futures-based portfolios, aiming to deliver risk-parity style returns with consistent outperformance and improved risk-adjusted outcomes.

Extending Ai For Alpha’s Decoding Suite

Live since 2022, Ai For Alpha’s proprietary Decoding technology powers transparent, cost-efficient replication portfolios for alternative strategies—including CTAs, Systematic Global Macro, private-equity and hedge-fund benchmarks—and is licensed by institutional investors and QIS desks of major banks.

“Clients want benchmark-consistent exposures that still earn their keep,” said Thomas Jacquot, who worked along Ai for Alpha's Product development team on the design of the strategy. “Risk Parity Decoding is built to deliver high correlation while purposely generating a positive information ratio, not just tracking.”

The challenge: a consistent information ratio

“The challenge for investors is to achieve a highly correlated benchmark replication exposure that can outperform when it matters,” said Béatrice Guez, CEO of Ai For Alpha. “By explicitly incorporating in our models an objective function that aims to replicate the benchmark with accuracy in good times and mitigate the downside in bad times, our graphical decoding model allocates across equities, bonds, credit, and commodities, with the goal to preserve the risk-parity style while improving the return-to-drawdown ratio.”

Two client-ready implementations

“We designed two tracks so allocators can choose between benchmark purity and a return-enhanced profile,” added Jacquot. “Both strategies are ~0.9-correlated to the benchmark (monthly) and 0.97 to each other.”

• Risk Parity Decoding (core): Uses the same investable universe as a standard risk-parity benchmark. In backtests, the strategy achieves a better Sharpe ratio with a lower max drawdown.
• Enhanced Risk Parity: The model incorporates Ai For Alpha’s CTA risk-off sleeve among its factors, targeting a higher information ratio and further drawdown reduction.

Implementation and access

Ai for Alpha licenses its replication portfolios to institutional investors and banks QIS desks implementing the strategies via SMAs or Indices. The Risk Parity Decoding model invests in highly liquid listed futures, providing daily transparency, scalability, and cost efficiency.

About Ai For Alpha:

Ai For Alpha is a leading provider of generative AI and AI-powered investment models to large financial institutions across Europe, the Americas, and Asia.

The company has received numerous awards for its achievements in AI applied to finance, including the EIT's European Digital Label for Innovation and the Women TechEU 2023 award. Ai For Alpha's publications rank in the top 1% of most-read articles on SSRN, the world's largest repository for research in social sciences.

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Ai For Alpha’s Risk Parity replication tracks when it should and seeks to outperform when it matters.