Paraguay Wrote: ------------------------------------------------------- > It’s portable two ways. > > One I have a manager that is long/short market > neutral on the Russell 2000 and consistently earns > 4% in every environment because he is a great > manager. I use his 0-beta portfolio and buy > futures or ETF’s to go long SPX now I have SPX + > 400bps of alpha on a yearly basis, much better > than a simple alpha strategy on the SPX because I > used the best long-short manager. > > Otherwise I find a manager that is great in say > FTSE Indexed stocks and generates 200bps of alpha > on a yearly basis. I short FTSE futures and go > long SPX futures. Now I have SPX + 200 bps even > though the alpha came from the FTSE and not SPX. +10. Thanks this clears up that question on sample 2 for me. I got it right through similar reasoning, but I still wasn’t able to explain it that well.
so just to make things clear, in the book on page 261 for investors that are precluded from investing on a long- basis the solution is. investor desires S&P 500 market exposure but has identified a capable manager of Japanes equities benchmarked to the topix index. the investor can port the managers alpha by taking a short futures positon in topix and a corresponding long position in S&P futures. - short position in topix = where is alpha here??? (in paraguays statement it said long and then also short) - long position in S&P 500 = beta
Gotta be honest, i don’t think there is any diff between equitizing a long/short, alpha and beta separation, and portable alpha.