Portable alpha

Wed May 21, 2008



How to get the overall returns you want, where you want them

Sara Hedberg, senior vice president of Financial Risk Management, defines portable alpha and discusses how to find alpha and transport it

There has been a lot of ink spilled on the subject of portable alpha. Academia and the industry press are filled with various definitions of alpha, beta, exotic beta, alternative beta and passive alpha – all of which refer to things that can be mixed and matched, ported and transported, over and under each other. There is more than sufficient discussion to muddle the concept, which in reality is relatively simple to understand and execute.

Here we aim to clear away the fog by providing a straightforward explanation of portable alpha in three parts. First, we define the concept. Next, we provide a practical example of a portable-alpha solution. Finally, we detail the characteristics of optimal alpha...

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