Risk Parity Portfolio ModelFree Financial Model Download

This allocation framework weights assets by inverse volatility to achieve equal risk contribution across equities, bonds, and alternatives—the core principle behind Bridgewater's All Weather Fund and similar strategies. Input annual expected returns and volatilities per asset class; the model computes optimal inverse-volatility weights, applies leverage (1.5x-3.0x), and outputs portfolio returns net of financing costs, management fees, and transaction costs. It then verifies that each asset class contributes equally to total portfolio variance using the full covariance matrix (not simplified weighting).

The model projects 5+ years of portfolio value, Sharpe ratio, drawdown risk (99% VaR), and rebalancing triggers. Key mechanics: leverage ratio drives a financing cost line (SOFR + spread), transaction costs scale with turnover, and fee schedules separate management from performance-based costs. Circularity is eliminated by computing fees and returns on opening (not ending) NAV. Validation checks confirm equal risk contributions, weight sums to 100%, and leverage remains within bounds.

Target users are portfolio managers, CIOs, family offices, and institutional allocators managing $50M-$50B who want to optimise across correlated asset classes. Includes sensitivity on leverage ratio and expected return assumptions to show how portfolio targets change under different macro regimes.