"Overlay" is the wildcard of the asset management lexicon. It seems that everyone is overlaying something on something else these days. As soon as we figure out what, we'll let you know.

A recent study suggested to some that the wealthy have turned their backs on indexing. But a closer look reveals wealthy investors actually index more of their mutual fund assets than the rest of us.

Separating alpha and beta is much like giving change for a twenty. You provide a $20 bill to the storekeeper and he "strips-away" only what is needed. But imagine a world with no change...

The benefits, costs and risks of 130/30, portable alpha, hedge funds and other emerging investment techniques are now quite clear to those immersed in the hedge fund and asset management community.  As we debate abstract ideas such as market inefficiencies, it’s easy to become frustrated with the pace of adoption.  But the fact remains that communicating these ideas to [...]

Putnam Institutional Investments says advances in financial technology such as credit derivatives, means today's fixed income strategies sure aren't your father's bond portfolio.

Location: New York Dates: November 7-9, 2007 Organized By: Terrapinn In a great example of real-time market response, organizers of “Portable Alpha USA” have recently added “130/30″ to the mix. While these two topics might appear to be slightly different species, we argue that they are part of the same genus: alpha-centrus investingae. Portable Alpha advocates would have [...]

Quant manager Northwater launched two new funds today that it calls “portable alpha funds”. They’re interesting offerings that definitely bifurcate alpha and beta.

Janus, the company whose logo looks like an early version of that face transplant performed in France last year, has come out with an intriguing offering that aims to separate alpha and beta investment decisions.

Northwater’s alpha-centric, open-architecture, solution-oriented business model: a harbinger of things to come? Northwater Capital Management is so into alpha-centric investing, that until last year, its old company home page included only three things: the company’s name, its logo and the CAPM. They have since opted for a more disarming view of the sunset over water (perhaps the fabled “north” water).  [...]

Bloomberg’s Chet Currier is generally in tune with alpha-centric investing.  In a column last fall, he quite correctly observed: The very model of a mutual fund is indeed outmoded, argues a large and growing group of financial researchers and professional money managers who are busy describing, building and proselytizing for a different way of doing things…The alpha-beta community [...]

Alpha Male was a moderator and panelist last week at an alternative investment conference in the Great White North.  One of the other speakers at the event was Lea Hansen, a Principal at consultant Greenwich Associates.  Hansen is a highly respected member of the Canadian financial intelligentsia, once serving as President of the Toronto CFA Society, and also as a commissioner of [...]

You don’t need a Ph.D. in physics to understand hedge fund replication. But Lars Jaeger has one just in case. And he used it masterfully today to draw an analogy between the model of the atom in the 19th century (a random mass of various particles) and the common paradigm understood today including a nucleus [...]

February 7, 2007 (Geneva) - AllAboutAlpha.com contributor Mark Baumgartner of Morgan Stanley says that Portable Alpha is on the minds of attendees of this year’s Institutional Fund Management conference in Geneva today.  Baumgartner reports the results of an electronic poll of audience members conducted this morning during a session entitled “Predicting Where the Smart Money is Going: [...]

“Online Options Trading is Getting Cheaper” By: Aaron Siegel, Investment News Published: February 5, 2007 According to the CBOE, only 5-10% of financial advisors have ever used options.  But Investment News says today that this may change with the introduction of new, cheaper ways to trade options online.  James Bittman, director of program development at the Chicago Board [...]

“Fidelity Targets Pensions Cash” By: Deborah Brewster, Financial Times Published: January 28, 2007 Note to pension readers: get ready for a call from your friendly neighborhood Fidelity sales guy.  According to the Financial Times, Fidelity’s institutional arm, Pyramis, is about to teach a clinic on alpha-centric investing: “Pyramis’s main push will be into the more sophisticated – and [...]

“These ETFs Bring Hedge Fund Tactics to the Mainstream” By: Rob Werry, SmartMoney.com Published: January 31, 2007 For individual investors, ETFs are the easiest way to satisfy the beta requirement in an “alpha-centric” portfolio.  This article illustrates how those ETFs now contain ingredients that are more exotic than you may have thought.  No longer are ETFs simply bundles of stocks.  Now, 2X [...]

By: Douglas Appell, Pensions & Investments Published: January 8, 2007 Any of you who have tried to read this article by PanAgora CEO, Eric Sorensen will understand clearly what he meant when he told P&I in a recent interview: “We’re academics. We do practical research, (at a) very high level, and we love to do it. And oh, by [...]

“The Asset Management Industry: A Growing Gap Between the Winners and the Also-Rans” By: McKinsey & Company Published: 2006 This McKinsey report echoes a theme discussed by Tim Price, the CIO of Global Strategies at UBP.  It essentially concludes that is is the best of times and worst of times for asset managers.  To back up this argument, McKinsey reports on a survey showing a [...]

By: Hugo Greenhalgh, FT Mandate Published: November 2006 FT published a good overview of portable alpha in November.  It’s a follow-up to FT Mandate’s June 2006 piece called “Portable alpha gains widespread acceptance“. A Disruptive Financial Technology Greenhalgh suggests the development of new financial technologies is enabling portable alpha: “With financial instruments such as swaps becoming more widely accepted, the notion of [...]

By: Tim Price, CIO, Global Strategies, UBP Published: January 4, 2007 Tim Price lives at an intersection.  Only his intersection doesn’t show up on Google Maps.  As the CIO, Global Strategies for one of the world’s largest hedge fund & private equity investors, he has his finger on the pulse of the alpha-generation industry and on his clients’ [...]

Location: Abu Dhabi Date: January 14-17, 2007 Organized by: UNI Training With more snow in Dubai than in Switzerland this winter, you may find yourself in the Gulf region with a few days to kill in January.  This workshop promises to help you “enhance and gain an intuitive understanding of portable alpha from a practitioner’s viewpoint”. View Workshop Brochure P.S. Speaking [...]

By: Cecily O’Connor, Pensions & Investments Published: December 25, 2006 When Donald Putnam (co-founder of Putnam Lovell) speaks, people listen.  So when he brands ETFs a “disruptive technology”, you know someone is in for a rough ride.  In this case, it’s mutual funds.  Like Morgan Stanley’s Mark Baumgartner and like us at AllAboutAlpha, Putnam views recent financial trends as fundamental game-changing [...]

Kudos to Bloomberg’s Chet Currier for shining the spotlight on alpha-centric investing today (“Does Alpha-Beta Spell “The End” for Mutual Funds?“).  Reports Currier: “The very model of a mutual fund is indeed outmoded, argues a large and growing group of financial researchers and professional money managers who are busy describing, building and proselytizing for a different [...]

“Inefficiencies of Portable Alpha Models” By: Eric Murphy, Princeton University Published: July 29, 2006 Ah, those hazy lazy days of your college summers.  Summer jobs, parties, weekends at the beach, writing portable alpha research papers. Princeton undergraduate student Eric Murphy did just this, finishing off his clearly worded, logical argument against portable alpha in the dog days of last summer.  In the [...]

By: Jack Coates & Mark Baumgartner, Morgan Stanley Published: July 2006, Euromoney Asset Management & Trading Handbook 2006 / 2007 “Every now and then, there is a development in the world of finance that results in a major paradigm shift.” “As with any new idea or methodology, there is an incubation period during which the idea is vetted and [...]

This is the final dispatch from Alpha Male’s road trip to Institutional Investor’s Alpha Generation Forum in New York last week. I’d be the first to admit alpha centric investing (portable alpha, active overlays, 1X0/X0 strategies, hedge funds, ETFs etc.) can be brutally boring sometimes. But to their credit, the speakers at this event kept us all [...]

Earlier today (Monday), I spoke with Jim Dunn, VP at Wilshire Associates about the firm’s new partnership with hedge fund manager Fairfield Greenwich Group to provide a turn-key portable alpha solution. A former convertible arbitrage manager and graduate of Villanova University, Dunn was hired by Santa Monica-based Wilshire about 18 months ago to spearhead the firm’s [...]

Portable Alpha – The Most-Talked-About Application of ‘Alpha’ is Becoming Reality By: Todd M. Brussel, The Royal Bank of Scotland Group Published: November 2006, Eurekahedge This article provides some good simple examples of how alpha can be distilled, ported and packaged in the form of structured products. “a synthesised structured portable alpha product employing FOF [funds of funds] can transform [...]

By: Edward Kung, Babson Capital & Larry Pohlman, Wellington Management Company Published:á=Winter 2005, Journal of Investing This article provides a ringing indictment of strategic asset allocation (SAA). The authors argue that an Á-°Alpha BetaÁ-? solution is far superior to a simple allocation to stocks/bonds/cash and sub-allocations to various equity classes. Á-°A policy portfolio needs to meet all of [...]

By: Vince Calio, Pensions & Investments Published: October 30, 2006 Okay, so not everyone is a huge fan of portable alpha.  Can you blame them after all the hype? But as the recent Goldman Sachs Annual client pow-wow illustrates, there remains much debate over basic definitions.  According to Pensions & Investments, endowments are particularly skeptical of portable alpha.  They argue that their [...]

By: Matthew Nelson, Tower Group Published: November 2005 (editor’s note: At AllAboutAlpha, we do all we can to ensure readers don’t get stuck having to subscribe to or purchase the content to which we link.  Whenever possible, we find free registrations or provide a free alternative versions of any for-fee content that we cover.  However, we make an [...]

Organizer: Strategic Research Institute Location: Scottsdale, AZ Dates: January 28-31, 2007 SRI bills this event as one of four “concurrent events” at its 2007 Alternative Investment Round-up (Yeeee-ha!).  Featuring actual case studies, this sounds like it could be a very interesting event.  According to the programme, the conference will include: “…case studies by investors who have completed implementation and can speak to [...]

When mutual funds can be cloned using a combination of ETFs and hedge funds, it’s no surprise that both sectors seem to be growing in tandem.                Experts have been trying to reconcile these seemingly contradictory trends.  Are we giving up on active management or embracing it?  Do we want boutique alpha generators or do we want [...]

By: Deborah Brewster, Financial Times Published: November 9, 2006 Blake Grossman, CEO of BGI, articulates a point that is central to alpha-centric investing: that the terms “alpha” and “beta” are not synonymous with “hedge” and “long-only”.  Says FT: “The head of Barclays Global Investors, the world’s biggest money manager, has said the distinction between hedge funds and the [...]

By: Christine Williamson, Pensions & Investments Published: October 30, 2006     Talk about industry leadership.  According to Pensions & Investments, Bridgewater (manager of $165 billion) has sent letters to its clients saying that portable alpha strategies are such a no-brainer, that any client not buying in to the approach in the next 12 months will be, as P&I puts [...]

By: Michael Dalis, State Street Global Advisors Published: August 24, 2006 Saddle up for the “Tour de Alpha”! Michael Dalis of State Street compares asset management to a bicycle race (work with us here).  He says that no one has ever won the Tour de France without first cooperating with his competitors.  Like an episode of “Survivor: Pyrenees“, cyclists must [...]

By: David Hoffman, Investment News Published: October 23, 2006 Smaller events on the PGA and ATP Tours always have a problem attracting the big names.  Take, for example, the Canadian stop on the ATP Tour.  It seems that every year the top players fall victim to some freak injury right before the Rogers Cup.  Thankfully, they always recover by the [...]

By: Diana Raluca Calin, Reading University Published: April 2006 EurekaHedge highlights an interesting paper on alpha and beta in hedge funds.  Written by a Masters student at the ICMA Centre at Reading University, the paper (a Master’s thesis using the EurekaHedge database) contains some interesting findings about the amount of alpha in hedge funds. The author conducts a [...]

By: Gareth Gore, Risk Magazine Published: October 2006 A hat tip goes out to the Kirk Report for identifying this article.  Apparently, the quant jocks at Risk Magazine have taken an interest in portable alpha not so much because of the flexibility of dividing alpha and beta, but because some newer versions of the venerable strategy involve highly [...]

By: Pensions & Investments Published: October 13, 2006 According to sources that “insisted on anonymity” for this story, the $34 billion Lucent pension program is close to adding $100 million to a portable alpha platform.  P&I seems to have a bit of a scoop here - no one there (other than deep throat him/herself) is returning calls.  But that’s life [...]

Here’s an interesting example of a genetically modified hedge fund that aims to deliver pure alpha. Armajaro Asset Management, a UK-based firm with significant business in Africa, recently launched a synthetic market neutral equity fund that the firm calls the purest representation of the portable alpha concept. As we have illustrated on this blog, a dynamically [...]

Presentation by: Pierre LaRoche, Desjardin Global Asset Management Presented at: The 2006 Stochastic Modeling Symposium and Investment Seminar, Toronto, April 4 2006 In case you missed the latest “stochastic modelling symposium”, you can always check out this presentation from the event that covers the role of portable alpha in the insurance industry…Or you could just watch ”America’s Next Top [...]

By: Max Darnell, First Quadrant Published: April 2004 First Quadrant was a pioneer in Alpha/Beta bifurcation and were even advocating portable alpha back in the late 90’s (when, to its chagrin, beta was producing double digit returns and no one cared about alpha).  So they’ve developed a very acute “sense of alpha” over the years.  This article, written [...]

By: Andreas Jaggi & Stefan Scholtz, RMF Published: July 2006, Hedge Funds Review This is a moderately technical article by RMF rocket scientists in the UK.  But for those so inclined, it provides a good mathematical example of porting alpha (factoring in the effect of inflation on a pension’s liabilities). “A large number of UK pension plans face [...]

Organized by: ProFunds Date: October 3rd, 2006, 4:15pm EDT Location: Your Office Portable Alpha Daily listened to this webcast on September 27 and suggests that it might be interesting for portable alpha enthusiasts such as Alpha Male and his readers.  It’s being held again on October 3rd.  While you technically need to be a financial advisor (“a financial professional”) [...]

By: Phyllis Feinberg, MARHedge Published: August 14, 2006 This article (reprinted below with permission from the publisher, MARHedge) covers a number of recent portable alpha transactions from Pennsylvania Employees’ Retirement Fund and The World Bank to Iowa’s Public Employees’ Pension and the Desert States United Food and Commercial Workers Local 99. Critics often charge that portable alpha is really [...]

By: Pensions & Investments Online Published: September 28, 2006 The San Diego County Employees’ Retirement Association has submitted a redemption request to you-know-who.  But at the same time, they continue to allocate to their highly regarded “alpha engine”.  A vote of confidence for portable alpha that illustrates it’s not just about investing in hedge funds as an asset [...]

By: Lex Huberts, Standish Mellon Asset Management Published: Fall 2004, Journal of Investing This paper does an excellent job of covering the many flavours of alpha-centric investing.  It also provides a number of hypothetical mathematical examples of portable alpha. Including the following: “Suppose a plan has a very talented Japanese stock selector who is considered very likely to [...]