Bridgewater gives “alpha-centric” a thumbs-up

4 June 2007

As regular readers will know, we’ve used the somewhat esoteric term “alpha-centric” to describe everything from portable alpha to 1X0/X0 on this website.  Sure, it’s a bit awkward, but ”portable alpha” is just one strategy that is enabled by explicitly identifying and manipulating the various embedded components of actively-managed funds (either long-only or hedge funds). 

We used the term to describe Bridgewater Associates, one of firms on the vanguard of alpha-centric investing, when they asked their clients to switch to portable alpha last October:

“Like us at AllAboutAlpha.com, CEO Ray Dalio believes alpha-centric investing represents a fundamental re-organization of the investment industry.”  

Despite raising the warning flag about hedge fund leverage, Dalio himself also used the term “alpha-centric” recently to describe Bridgewater’s philosophie de la vie.  As Money Management, an Australian magazine, reported a couple of weeks ago:

“Founder and chief investment officer Ray Dalio told Money Management that the ‘pure alpha’ strategy is ‘based on a separation of alpha and beta, in what we call alpha-centric investing’.”

So perhaps the term “alpha-centric” isn’t so goofy after all.  Curious about the origins of this term, we Googled ”alpha centric”.  The results were somewhat of a (pleasant) surprise.  According to Google, it seems that AllAboutAlpha Hall-of-Fame members Angelo Calvello and Lee Thomas used the term first.

• Calvello (then with State Street Global Advisors) wrote an article for the SSGA website in August 2005 entitled “Succeeding in an Alpha Centric World“.    
• Almost concurrently, Thomas (whose article “Engineering an Alpha Engine” is in the Hall of Fame) wrote about an “alpha-centric” approach to investing in the September/October 2005 edition of the CFA Magazine.  

So it appears the curators of the Alpha Hall of Fame we were on to something when they inducted Calvello, Thomas and Dalio into their hallowed halls.  Of course, this is based solely on a Google search.  So if anyone knows of earlier citations, please drop us a line.  There’s always room for more in the Hall of Fame.

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One Response to “Bridgewater gives “alpha-centric” a thumbs-up”

1. allaboutalpha.com: Welcome to AllAboutAlpha.com Says:
   July 4th, 2007 at 10:44 pm

   […] So says Angelo Calvello of Man Investments in an “institutional investor only” white paper released earlier this year (posted here at AllAboutAlpha.com).  Calvello is one of the instigators of the alpha-centric revolution, using the term “alpha-centric” as far back as 2005 (see related posting).  Acknowledging the operational challenges inherent in a relatively complex strategy such as portable alpha, he now proposes a “bundled” solution that wraps the various components of portable alpha into one entity, such as a special purpose vehicle or a fund).  According to Calvello, this would dramatically simplify the lives of pensions and endowments that are current reticent about diving into portable alpha.    […]