13 October 2009

Portable Alpha

Portable alpha is an investment management term which refers to the return of an investment manager who has intentionally and completely eliminated his market risk, or beta. The return of such a portfolio will only represent the manager's skill in selecting investments within the market, and will be independent of the direction or magnitude of the market's movement. The elimination of market risk can be accomplished through use of derivatives (e.g. futures, swaps, options) or short selling.

This what we did with Nikko back in the olden days...1991! Bought 30 names and sold 30 names.
Avg returns on one side +20%. Just couldn't do it in size. Or compete with dotcom returns of late90s.

Tant pis.

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