Portable Alpha Gains Widespread Acceptance
Aug 31st, 2006 | Filed under: Portable Alpha & Alpha/Beta SeparationBy: Paula Garrido, FT Mandate
Published: June 2006
Excerpt:
“The concept of portable alpha is not new and, in fact, investors have been using these types of strategies for over two decades. The difference now, however, is that portable alpha strategies are gaining widespread acceptance among institutional investors globally. One of the reasons for this is that pressure on investors to improve funding levels is greater than ever. But also institutions are now more familiar with the wide range of alternative or sometimes more exotic investment strategies used when implementing portable alpha.”
To me portable alpha is two things, says Paul Ullman, president at Highland Financial Holdings. One is a mechanism for the pension world globally to try and earn greater returns, because there is a global problem of underfunded liabilities. But also, he adds, there is a separate issue regarding efficiency. Portable alpha conceptually is a wonderful way to gain efficiency in an investment portfolio, he says. I think it is important to separate these two aspects.
The idea is that if alpha exists in a particular asset class you can try and get it and then swap it to whatever structure suits your liabilities, says Mr Brown. But for many funds the hassle of doing that is what can potentially drive them to more structured solutions, says Mr. [Robert] Brown [partner, senior investment consultant at Watson Wyatt].”
[…] FT published a good overview of portable alpha in November. It’s a follow-up to FT Mandate’s June 2006 piece called “Portable alpha gains widespread acceptance“.  […]