A Brief History of “130/30”

130/30 16 Apr 2007

“130/30” seems to have successfully supplanted “portable alpha” as the term most likely to roll off the tongues of institutional investors and asset management marketers.  But how did such a term arise from nowhere so quickly to capture our collective imagination? This article on the website of UK-based consultancy bfinance written by 130/30 advocate (and amateur historian), Tris Lett, says the term is really only about 5 years old and it hails from California. Says Lett:

“Harindra de Silva, Roger Clarke and Steve Sapra of Analytic Investors earn the credit for naming the process and operating the first real time portfolio. On July 1, 2002, Analytic launched its Core Plus Equity Composite (120/20) strategy.”

“This makes perfect sense given the line of portfolio research they published based on Grinold/Kahn’s “Law of Active Management” to whose logic they introduced the important notion of the transfer coefficient. They pointed out that short sales increase the alpha generating opportunity set.”

For those new to 130/30 (“1X0/X0”), this article is a great introduction to the concept (and not just because it references “the widely read blog AllAboutAlpha.com“.)

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