Portable Alpha: A Practitioner’s Guide

Dec 13th, 2006 | Filed under: Portable Alpha & Alpha/Beta Separation

By: Jack Coates & Mark Baumgartner, Morgan Stanley
Published: July 2006, Euromoney Asset Management & Trading Handbook 2006 / 2007

“Every now and then, there is a development in the world of finance that results in a major paradigm shift.”

“As with any new idea or methodology, there is an incubation period during which the idea is vetted and tested by a few leading practitioners. As adoption accelerates and success stories spread, acceptance of the methodology occurs, often driven at exponential rates by word of mouth transmission. The media plays a key role in this dissemination of information. We are still in the early stages of the portable alpha lifecycle…”

Morgan Stanley’s Jack Coates and Mark Baumgartner clearly believe in portable alpha.  However, this article contains more than portable alpha cheerleading.  It also provides a good, non-technical overview of implementation issues such as: embedded betas, trading considerations, leverage & liability. 

But the following chart, depicting the growing media interest in portable alpha, particularly caught our eye:

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  1. All About Alpha » Blog Archives » I know what you did last summer…you wrote a paper lambasting portable alpha December 18th, 2006 4:11 pm :

    [...] Portable Alpha: A Practitioner’s Guide [...]

  2. All About Alpha » Blog Archives » Why Hedge Fund Regulation is All About Alpha January 28th, 2007 10:59 pm :

    [...] “Alpha-centric investing” refers to more than just “portable alpha”. As we have reported on this blog, it encapsulates new operational infrastructures (UMAs), new fee arrangements (performance fees with benchmark hurdles / fee-per-alpha), new metrics (ranking funds based on alpha instead of absolute returns), new organizational structures (small teams of alpha producers), and new advisory models (fee-based vs. commission-based). A recent investment newsletter highlights another domain that is impacted by this simple idea: regulation. [...]

  3. All About Alpha » Blog Archives » Smart Money Going to Portable Alpha: Conference Attendees February 7th, 2007 8:25 pm :

    [...] February 7, 2007 (Geneva) – AllAboutAlpha.com contributor Mark Baumgartner of Morgan Stanley says that Portable Alpha is on the minds of attendees of this year’s Institutional Fund Management conference in Geneva today.  Baumgartner reports the results of an electronic poll of audience members conducted this morning during a session entitled “Predicting Where the Smart Money is Going: Tomorrow’s Successful Products and Investments”. [...]

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