Walking the (Beta) Line
Dec 4th, 2007 | Filed under: Alternative Beta & Hedge Fund ReplicationIn August 1956, Johnny Cash released a song that later became the title to a movie about the troubadour called Walk the Line. In the song I Walk the Line, Cash promises his wife, Vivian, that he will remain faithful to her even with the temptations that come with touring.
In an October 2007 publication by Northern Trust, the firm says that hedge fund managers “walk the beta line”. In other words, they walk a fine line between making sweet alpha and have a one-night stand with an exotic beta.
Says the article:
“Scores of hedge funds have lived up to perceptions in recent years, outperforming stocks in bull markets and reaping profits for investors even when equities are being hit hard. Still, not all hedge funds are meeting bold expectations. As a result, suspicion has grown that a large number of funds — even those insulating investors from market direction and keeping pace with the applicable strategy index — do not perform in a way that can be explained by the alpha-beta divide.”
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