Portable alpha - Rise of the machine
Oct 17th, 2006 | Filed under: Portable Alpha & Alpha/Beta SeparationBy: Gareth Gore, Risk Magazine
Published: October 2006
A hat tip goes out to the Kirk Report for identifying this article. Apparently, the quant jocks at Risk Magazine have taken an interest in portable alpha not so much because of the flexibility of dividing alpha and beta, but because some newer versions of the venerable strategy involve highly quantitative algorithmic investing techniques.
I’m sure traders might take issue with this piece, but it does speak to the constant commoditization of “talent”, a topic recently covered at AllAboutAlpha (see posting):
“Man versus machine is slowly becoming a reality in the market-place, with strategies that once were the trademark of only the most experienced traders now being replicated by computers - cheaper, quicker and, so its advocates say, more reliably.”
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[…] Okay, maybe not the whole Earth, but a serious chunk of it. Why? Because passive alternatives will begin to crowd out new entrants - just like they did in the mutual fund industry. Like the quants at Barclays, JP Morgan and SocGen, the authors of this report espouse a new form of quasi-active hedge fund than produces exotic beta at fees above pure passive management (e.g. an ETF) but below pure active (hedge) funds: “…it may be increasingly difficult for investors to justify paying hedge fund fees for the performance of the average active manager. Passive alternatives to active hedge funds represent a natural evolution in an increasingly mature industry.” […]
[…] Portable alpha - Rise of the machine By: Gareth Gore, Risk MagazinePublished: October 2006A hat tip goes out to the Kirk Report for identifying this article.? Apparently, the quant jocks at Risk Magazine have taken an interest in portable alpha not so much because of the flexibility of?dividing alpha and beta, but because some newer versions of the venerable strategy involve highly [.] (more) […]