Active investment managers provide two types of return: the return generated from market exposure ...
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Active investment managers provide two types of return: the return generated from market exposure or beta and the return that comes from selection skill or alpha. Active beta returns typically come from market timing. That is, increasing market exposure in up-markets and decreasing it in down-markets. Passive beta returns come from index fund exposure. Alpha comes from security selection within an asset class. As such, the value-added from a true alpha strategy does not depend upon the direction of the market. A true stock-picker, for instance, would have a beta of 1.0 relative to their market benchmark, and all value-added would come from their active risk or stock picking. Portable alpha refers to the process of separating the alpha from the beta and then applying it to other portfolios. Explain the concept of alpha porting using futures overlay.
Active investment managers provide two types of return: the return generated from market exposure
or beta and the return that comes from selection skill or alpha. Active beta returns typically come from market timing. That is, increasing market exposure in up-markets and decreasing it in down-markets. Passive beta returns come from index fund exposure. Alpha comes from security selection within an asset class. As such, the value-added from a true alpha strategy does not depend upon the direction of the market. A true stock-picker, for instance, would have a beta of 1.0 relative to their market benchmark, and all value-added would come from their active risk or stock picking. Portable alpha refers to the process of separating the alpha from the beta and then applying it to other portfolios.
Explain the concept of alpha porting using futures overlay.
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