Swedish Pension Plan: Alpha-Beta Split = Investment “Creativity”
Dec 17th, 2007 | Filed under: Portable Alpha & Alpha/Beta SeparationThis month’s alpha-centric ”fan-of-the-month” award goes out Tomas Morsing, head of quantitative strategies at the 24 billion Euro Swedish public pension, AP2 (one of several ”buffer funds” serving the nation’s citizens). Morsing addressed the London edition of Terrapinn’s Portable Alpha conference series last week and stole the show, on our opinion, with his pronouncement that alpha-beta separation has injected “creativity” into his management team.
According to Thomson Investment News, Morsing told the crowd:
“There has been a significant change in attitude of our internal team and this split has certainly focused minds and boosted creativity – we have moved from a traditional way of managing money to the introduction of several new ideas…”
“Initially, there was a lot of reluctance from these two teams to relinquish capital because, essentially, they are being told that if they don’t take risk, they will not generate anything for the pension fund…But after a while, they realised that they did not have any responsibility for beta and had complete freedom to chase alpha, without any restrictions…”
AP2’s website contains more on the plan’s alpha-centric credentials, including this chart showing 2006 return contributions from alpha and beta sources:
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