Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 51) In Theory Portable Alpha Fallacy of The Alpha P ortable alpha is widely regarded as one of the more positive financial innovations of recent years. Indeed, in almost no time at all, the concept of transporting alpha to create moreefficient portfolios has taken a road not often traveled, from the pages of the academic journals into the popular perception of investment professionals. Portable alpha is now viewed as a mainstream investment option, with pension funds allocating money to the strategy the same way they buy stocks, bonds or real estate. A 2007 survey by U.K.-based Centre for Research in Enterprise and Technology in Europe found that fund Illustration by Edel Rodriguez for Alpha Portable By Mark Kritzman managers rated the development of portable alpha expertise as the second-most-important strategic initiative for their firms, after liability-driven investing. Tabb Group, a Westborough, Massachusetts–based research firm, believes that 130/30 and other so-called alpha extension strategies — an increasingly popular way for pension plans to implement portable alpha — will achieve compound annual growth rates of about 140 percent between now and 2010. In October, Merrill Lynch & Co. issued a report in which it predicts that the total 130/30 market could grow from $80 billion to $1 trillion in five years. Portable alpha and alpha extension strategies do For pension funds and other institutions looking for better risk-adjusted returns, portable alpha is an intriguing strategy. Such investors have begun to embrace the idea of separating alpha — a manager’s ability to beat the market — from the return of a benchmark or index and then transporting it to another part of their portfolio to improve efficiency. But portable alpha is not a magic bullet for improving portfolio efficiency, according to longtime academic and researcher Mark Kritzman, who says investors can achieve the same result without splitting alpha from beta. DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 51
Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008 Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative Institutional Investor's Alpha Magazine - December 2007/January 2008 Institutional Investor's Alpha Magazine - December 2007/January 2008 - Institutional Investor's Alpha Magazine - December 2007/January 2008 (Page Cover1) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Institutional Investor's Alpha Magazine - December 2007/January 2008 (Page Cover2) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Contents (Page 1) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Contents (Page 2) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Letter from the Editor (Page 3) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Letter from the Editor (Page 4) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 5) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 6) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 7) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 8) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 9) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 10) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 11) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 12) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 13) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 14) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 15) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Longs & Shorts (Page 16) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Pension Corner: Liberal Returns (Page 17) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Pension Corner: Liberal Returns (Page 18) Institutional Investor's Alpha Magazine - December 2007/January 2008 - The Good Guy: Inner-city MVP (Page 19) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 20) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 21) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 22) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 23) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 24) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 25) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 26) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 27) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 28) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Cover Story: Marathon Men (Page 29) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 30) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 31) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 32) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 33) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 34) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Interview: Rizk Management (Page 35) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 36) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 37) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 38) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 39) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 40) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Living on Hostile Ground (Page 41) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 42) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 43) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 44) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 45) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 46) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 47) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 48) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Profile: Buy and Hold (Page 49) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 50) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 51) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 52) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 53) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 54) Institutional Investor's Alpha Magazine - December 2007/January 2008 - In Theory: The Fallacy of Portable Alpha (Page 55) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Strategies: Changing Course (Page 56) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Strategies: Changing Course (Page 57) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Strategies: Changing Course (Page 58) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Strategies: Changing Course (Page 59) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Strategies: Changing Course (Page 60) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Alpha Bytes: Behind the Scenes (Page 61) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Alpha Bytes: Behind the Scenes (Page 62) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Alpha Bytes: Behind the Scenes (Page 63) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Unhedged: Commentary: An Activist Alternative (Page 64) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Unhedged: Commentary: An Activist Alternative (Page Cover3) Institutional Investor's Alpha Magazine - December 2007/January 2008 - Unhedged: Commentary: An Activist Alternative (Page Cover4)
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.