Investment research boutique Elston Consulting has teamed-up with Milliman Financial Risk Management to launch a multi-asset dynamic risk parity index.
The Elston Strategic Beta Dynamic Risk Parity index tracks 14 ETFs across five asset classes; fixed income, property, gold, UK equities and international equities.
Rebalancing monthly, the index is based in sterling and can hold a maximum of 15 ETFs.
The index's objective is to offer a multi-asset strategy that is diversified through a rules-based systematic approach.
Its differentiator, the firm said, is the strategy will be weighted by the equal contribution to overall risk by each asset class, rather than by asset weights alone.
The asset class weights are then dynamically adjusted using Milliman's volatility correlations model as asset risk and correlations change.
The index also has a volatility limit meaning it moves into short-duration bonds during times of market stress.
Henry Cobbe, head of research at Elston Consulting, said: "Indices are evolving from simple building blocks into dynamic strategies to provide lower cost alternatives to an investor's diversification toolkit.
"The index offers a systematic approach to risk-based diversification in a way that is convenient, transparent and liquid."
Neil Dissanayake, director of European trading at Milliman, commented: "Investors large and small are looking for alternative ways to access differentiated returns and manage market risk in a way that is systematic, liquid and efficient."
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