Fahrenheit 130/30
Mar 9th, 2007 | Filed under: 130/30So called “130/30″ strategies have been bubbling up in the asset management community for some time now. But things boiled over with the release of Merrill Lynch’s report on Tuesday - moving 130/30 from the industry rags (like this one) to the mainstream (UK, Canada, US). In that report, Merrill Lynch said:
“We are expecting a wave of asset managers to begin offering 130/30 portfolios this year, as the gap between traditional managers and hedge funds continues to narrow…fundamental managers and hedge funds are increasingly offering or considering the portfolios.”
Buried in all this newfound fame is the story of 130/30’s previous life as a long-bias hedge fund. So we find it somewhat ironic that investors and advisers who have hitherto avoided hedge funds like the plague are now espousing the virtues of 130/30. The recent hype is obfuscating the truth about 130/30: it’s simply another marketing package delivering an ETF and a hedge fund. In other words, 130/30 is simple alpha-centric investing, not some new asset class.
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Any idea who first came up with the term 130/30 or 120/20 or 1X0/X0 ? Was it Merrill Lynch or Goldman Sachs ?
No idea for 130/30, 120/20 etc. We just pulled “1X0/X0″ out of our collective butts here at AAA, but perhaps it was already out there too…
[…] There has been a flurry of activity in the 130/30 space so far this month that seems to rival the hoopla over US college basketball. No sooner had Merrill Lynch released its report on 130/30 than State Street landed a 165 million GBP 130/30 mandate from Britain’s Asda Group. With some industry insiders saying the current size of the US 130/30 market is US$50b AUM, that would be nearly 0.7% overnight growth had it happened on that side of the pond.   […]
[…] Regular readers may recognize chart from papers discussing the similar concentration of equity indices. For example, this one from Merrill Lynch’s recent 130/30 paper: […]
[…] While I don’t necessarily see 130/30 as the “worst of all worlds”, I do agree with Roger that 130/30 bears a remarkable similarity to the failed beta-plus strategies of old. (see related posting: Fahrenheit 130/30). […]