Strategic Investment Group - Portable Alpha Capabilities

ALPHAPLUS CAPABILITIES

As investors seek greater efficiency from deployed capital with the objective of improving the risk-return profile of the portfolio as a whole, interest has increased in portable alpha strategies. Few realize, however, how portable alpha programs have evolved since their first use in the early 1980s.

Conventional active strategies aim to generate alpha by investing within the market or sector to which they are benchmarked. In other words, the ability to generate alpha is constrained to the asset class and strategy being pursued. Portable alpha programs remove these limitations, searching for alpha across asset classes using a broader set of investment techniques.

The earliest efforts to isolate alpha focused on one alpha source; initially, from traditional long-only strategies. Investors sold futures to neutralize beta against an active long equity strategy. In the next evolution, a single hedge fund, usually following a market-neutral strategy, was the sole alpha generator. The subsequent generation focused on the benefits of multiple sources of alpha. This diversified approach can be implemented by a multi-strategy hedge fund. Today, in its latest generation, Strategic’s AlphaPlus strategies use multiple diversified alpha streams selected in an open architecture framework to reduce manager-specific risk.

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