Risks And Possible Downsides

Wed Jun 1, 2005


Are there any downsides to using portable alpha and how can investors new to the are avoid any possible pitfalls?

Niki Natarajan, InvestHedge
One question that all investors are asking is, what are the risks?

John Stevens, GMAM
For me, the conversation about portable alpha is really a conversation about risk budgeting, and the separation of alpha from beta is embedded in that process.

The continuing challenge for every investor is to understand the types of risk that are really being taken. At GMAM, we continually strive to improve our risk management process including the creation of a database containing weekly hedge fund returns and market data to determine if managers' beta exposures are more significant than previously thought.

Niki Natarajan "What are the risks?"

It is also important to track risk exposures over time because of the variability of fund betas and correlations in different market regimes. These sensitivities...

ISSN: 2151-1845 / CDC10004H


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