What do Ikea and maple syrup have in common?
Jan 31st, 2008 | Filed under: Institutional InvestingThe 80 billion Swedish krona Sjunde AP7-foden (“AP7″) public pension fund might as well be called the “Alpha-Pure” fund. Last year, the fund made a splash by re-organizing itself along alpha and beta lines and this week, one executive tells Thomson Investment News that the quest for “pure alpha” continues.
According to Thomson, AP7 CIO Richard Grottheim has just selected what he calls “pure alpha European equity managers” – this, after hiring two ”pure alpha” domestic managers already this year. If these mandates pan out as expected, Grottheim says he will roll out the “pure alpha” strategy to Asia and emerging markets.
So what exactly is this “pure alpha” shtick anyway? More than an empty marketing promise, the term is used by AP7 to describe a form of unfunded alpha overlay that uses proceeds from shorts to fund long positions – kind of like the “30/30″ portion of a 130/30 fund. Says Thomson:
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I saw that “hidden alpha” and wondered like you what it meant. It was easy to guess who the newest petro swf.
When will we get the answer of the question!
I’m still not sure about the answer!
[...] On January 31, we made a quip that one of the largest and fastest-growing sovereign wealth funds in the world was right at the doorstep to the United States – the $120 billion Canadian Pension Plan. [...]