Hedge Fund Intelligence Portable Alpha Roundtable
Jul 5th, 2006 | Filed under: Portable Alpha & Alpha/Beta SeparationBy: Niki Natarajan, Hedge Fund Intelligence Magazine
Published: June 2005
Excerpt:
As more institutions try to figure out how to add hedge funds to their portfolios, portable alpha is emerging particularly in the US as a way of using hedge funds, without significantly changing a pension fund’s asset allocation. Here we define portable alpha by talking to the investors who are using the strategy today.
Portable Alpha and Pensions
The key to setting up a successful portable alpha programme is picking the best alpha generator. But given alpha is not just found in hedge funds, how does an investor navigate its way through the different options available to them?Isolating and Transporting Alpha
Before transporting alpha to a portfolio, the alpha has to be isolated. We talk to the users of portable alpha as well as the generators of alpha and those charged with transporting it, to find out where to find alpha, how to capture it and lastly what are the options available for transporting it.Risks and Possible Downsides
All investors looking at hedge funds, which ever way they are packaged, will always ask about the risks involves. Hedge funds carry the threat of headline risk, perhaps more than most other asset classes. The participants discuss that risks to take into consideration when implementing a portable alpha programme.Costs Versus Returns
Institutional investors, particularly pension funds, are very sensitive to costs. Portable alpha might be a good solution to add returns to the portfolio, but what are the costs involved. Here we examine all the different costs incurred by the investors as they implement a portable alpha programme.
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