Valentine’s Special: Canada’s Secret Crush on Portable Alpha
Feb 15th, 2007 | Filed under: Portable Alpha & Alpha/Beta SeparationAlpha Male was a moderator and panelist last week at an alternative investment conference in the Great White North. One of the other speakers at the event was Lea Hansen, a Principal at consultant Greenwich Associates. Hansen is a highly respected member of the Canadian financial intelligentsia, once serving as President of the Toronto CFA Society, and also as a commissioner of the Ontario Securities Commission, Canada’s leading securities regulator.
Hansen presented the results of a study conducted by Greenwich Associates in various countries last year. The study involved interviews with 2,400 institution in the US, Canada, Britain, Continental Europe, and Japan. Most of the people in the conference room – including Alpha Male himself – were amazed to learn that Canadian pension plans harbour a deep secret: they actually love Portable Alpha.
Apparently Canadian pension plans show three times more love for portable alpha than pension plans in the rest of the world. Way over a third of Canadian plans said there “are considering” portable alpha. This compares to 13% of interviewees in the United States and only 11% in Japan.
Given this, it’s no surprise that Canada also has a crush on portable alpha’s big brother, absolute returns (28% “considering” vs. 12% in the US). In fact, Canada must have handed out Valentine’s cards to the whole class this year. Its interest in all topics was ranked either #1 or #2.
Revelations of this long-harboured infatuation with portable alpha was met with gasps (and a few giggles) from the audience at the conference. It was a shocker because it is generally assumed that the Canadian pension market had an allergy to anything new. This is mainly because the hedge fund revolution seems to have arrived in Canada unconscious on a gurney.
Indeed, even Greenwich acknowledges this sorry state of affairs. The following slide from Hansen says that Canadian institutional interest in hedge funds is now flat-lining:
Why are Canadian pensions playing hard to get? This was the central question raised during the final panel at this event. But unfortunately no one had an easy answer. Maybe Canadian pensions are too conservative; maybe Hansen needs to go back on the Ontario Securities Commission and shake things up a little; or maybe Canadians just need to read a little more AllAboutAlpha.com each day.
-Alpha Male
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