9/12/2023 0 Comments Drawdown fund rebalance strategy![]() ![]() Further, finding the combination of both beta (which is easy to acquire) and alpha in the same long-only investment creates a limited set of investment opportunities. Seeking AlphaĪlpha has proven increasingly elusive over the years, especially for investors allocating to active managers in the long-only space. Perhaps most importantly, they can focus on other opportunities in the market rather than the stress of margin calls. Through active risk controls and exposure management, we believe that investors can both improve outcomes during market drawdowns and thus gain valuable alpha returns in hedge fund portfolios, as well as avoid compromising their overall strategic beta allocation. Second, an investor who may have anticipated this issue might have held excess cash, thereby limiting the opportunity set of the portable alpha strategy overall. First, given liquidity terms at hedge funds, distressed market trading decisions often come at the expense of the beta component through the sale of equity futures at potentially low levels. This presents two detrimental scenarios for portable alpha strategies. ![]() This breakdown may cause larger-than-anticipated losses, result in unexpected margin calls or even force potentially adverse trading decisions to defend portfolios from further losses. Alpha can be unstable, especially in market downturns as historic correlations between traditional asset classes and hedge funds can rapidly break down. Finding alpha and constructing portfolios of hedge funds is no small challenge. Portable alpha – or strategies designed to add alpha returns without risking the overall beta of the portfolio – are an important tool for investors.
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