Alpha Transport in Asset Allocation
| Jul 17th, 2006 | Filed under: Portable Alpha & Alpha/Beta Separation | By: Alpha Male |
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By: Curt Custard, Liam Tierney, Schroders Investmet Management
Published: April 2006
Excerpts:
“Institutional investment portfolios have traditionally been constructed around a strategic asset allocation benchmark, allocating assets to the assets and markets that are expected to best meet the overall risk Institutional investment portfolios have traditionally been constructed around a strategic asset allocation benchmark, allocating assets to the assets and markets that are expected to best meet the overall risk.”
“Alpha transport’ (sometimes called ‘portable alpha’) allows asset allocation returns – those which result from the markets in which you invest (beta) – and the returns attributable to manager skill over and above market returns (alpha) to be captured independently of each other.”
“The net result from an asset allocation perspective is that the fund manager is not restricted to generating outperformance solely from those markets in the strategic policy portfolio, allowing institutional investors to reach their desired risk / reward trade-off.”
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