Portable Alpha

Portable Alpha Strategies

Portable Alpha hedge fund strategies are those that take a beta exposure while then overlaying that with their attempt to produce alpha within that same portfolio. Beta exposures have become increasing inexpensive to create for investors allowing managers to focus on producing alpha.

Portable Alpha Strategy Example: An easy example would be to take a long only equity manager. They may bench their strategy against the Russell 3,000. They might replicate the beta exposure to the Russell 3,000 while taking specific bets on a several dozen (20-140) securities to produce alpha. These portable alpha strategies are often popular among institutional investors who sometimes care more about risk budgeting and how much a single manager contributes to their risk budget as they do about performance returns.

Read dozens of additional articles like this within the guide to Hedge Fund Terms.

- Richard

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