The latest ‘must use’ buzz word floating around the halls of portfolio managers’ offices seems to be ‘alpha’. If you don’t use it, you’d better start, or you’ll get left behind if you don’t glom on. Alpha is in. It’s all about alpha.
We see money managers bandying the term about all over the place Just this past weekend in its Barron’s Roundtable "Lessons of a So-So Year" article , Steve Tananbaum, chief investment officer of $7 billion NYC hedge fund Golden Tree Asset Management said:
We have several strategies. Our flagship fund, the Master Fund, is up 12.50%, year to date. Two other funds — Credit Opportunities, which uses leverage, and Capital Solutions, which is a middle-market lending fund — are both up around 11%. For me, this year was about alpha, not beta.
Today’s NY Times also focused on the alpha fixation which noted that "Money managers have been stepping up their search for Wall Street’s holy grail: an investment that consistently generates "alpha"".
"Institutions are getting really aggressive about looking for alpha," said Jane Buchan, chief executive of Pacific Alternative Asset Management, which manages funds of hedge funds. "They are investing anywhere they can find it." ….
Even as all that cash is flowing into portable alpha strategies tied to hedge funds, some consultants fear such strategies will no longer outperform the markets to the degree they once did.
"Portable alpha sounds great in theory, but I don’t believe alpha is something that is just sitting on trees, waiting to be plucked," said Peter L. Bernstein, a consultant to pension funds and other institutions. "Investors underestimate the risks in hedge funds."
Yet pension funds and other adopters of portable alpha strategies are increasingly getting their alpha from a diversified portfolio of hedge funds.
How to generate Alpha in a Predominantly Beta World – NY Times
Lessons of a So-So Year – Barrons
