Portable Alpha: A Practitioner’s Guide

By: Jack Coates & Mark Baumgartner, Morgan Stanley
Published: July 2006, Euromoney Asset Management & Trading Handbook 2006 / 2007

“Every now and then, there is a development in the world of finance that results in a major paradigm shift.”

“As with any new idea or methodology, there is an incubation period during which the idea is vetted and tested by a few leading practitioners. As adoption accelerates and success stories spread, acceptance of the methodology occurs, often driven at exponential rates by word of mouth transmission. The media plays a key role in this dissemination of information. We are still in the early stages of the portable alpha lifecycle…”

Morgan Stanley’s Jack Coates and Mark Baumgartner clearly believe in portable alpha.  However, this article contains more than portable alpha cheerleading.  It also provides a good, non-technical overview of implementation issues such as: embedded betas, trading considerations, leverage & liability. 

But the following chart, depicting the growing media interest in portable alpha, particularly caught our eye:

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