Equitizing a L/S Portfolio vs. Alpha Beta Separation vs. Portable Alpha

[the show NY]

I am struggling to see the differences. I thnk the distinction is as follows but please help me out:
Equitiizing a long/short portfolio:
Long Stock 1 in industry A
Short Stock 2 in industry A
Long equity futures or ETF in industry A
RESULT: Alpha from Market Neutral Long Stock/Short Stock and beta from equity futures or ETF
Alpha and Beta Separation:
Long Stock 1 in industry A
Short Stock 2 in industry A
Long index funds or ETF in industry B
RESULT: Alpha from Market Neutral Long Stock/Short Stock and beta from equity futures or ETF. Different from first strategy in that some markets are efficient and are difficult to obtain alpha, so you can obtain the alpha and beta in different markets. Also, it seems equity futures are not used in this strategy–just index funds or ETFs.
Portable Alpha:
I’m not really sure how this is differnt from Alpha and Beta Separation. It seems that a manager is hired and can then get the alpha wherever he chooses whereas with Alpha and Beta Separation, you just choose an index fund or ETF and get the alpha on your own. Is that it?
Thanks in advance.

 

[the show NY]

any suggestions? thanks.

 

[rahuls]

Long/short portfolio:
Long Stock 1 in industry A
Short Stock 2 in industry A
(If you are shorting in the same industry you are approximately market neutral. You can earn two alphas - one on long side & the other on short side. This is not available while pursuing long-only approach. Again the long & short stocks should have the same sensitivities i..e beta in order to eliminate systematic risk)
Benchmark in market neutral L/S strategy would be risk free rate of return.
Long equity futures or ETF in industry A
(Not necessarily in the same industry. The idea you are capturing alphas & now feel that overall market would go up, so you equitize preferably through ETFs. You go long on ETF/future equal to amount of short stock)
Benchmark after equitizing L/S strategy would be index underlying futures or ETF.
Return earned on Equitized market neutral L/S - profit/loss on L/S stocks, profit/ loss on ETF/future, interest earned on amount equivalent to short stock.)
Alpha and Beta Separation:
You separate alpha & beta by enagaging mutliple managers, one speciallized in generating alpha through security selection & the other one index fund manager to provide beta exposure.
passive index manager is less expensive than active manager. It allows to manage market risk & active risk more effeiciently.
Portable alpha:
Alpha is portable since it can be added to different systematic exposure. Suppose active manager is pursuing selection skills in Indian market (wait a minute not an emerging market coz it may be add to complexity) rather in japanese equities by going long & short on the same industry to be market neutral, targeting 4%. Index fund manager hired is Russell 2000 (as given in text book). Strategy becomes Russell 2000 return + 4% (alpha).
Any other views…Guys cpk, hank moody, markcfail & others??

 

[markCFAIL]

To be honest I really don’t think there is much of a difference, other than the context of how they ask the question. For example: is the goal to add a market return to a market neutral portfolio, or is it to be able to freely move your market neutral alpha to different index exposures? Think of how they could ask you a question where it will be detrimental to not be able to differentiate - there is either going to be a multiple choice, in which case we should have enough information to infer which strategy to use, or its an essay, where we can defensibly describe the strategy and it shouldn’t really matter so long as we describe it correclty and it pertains. The only scenario I see as problematic is if they outright aske you to differentiate the strategies in essay format, and that would be some BS considering I don’t recall seeing it spelled out in the text.
There really is alot of overlap, and i think that you have the ideas down correctly, it’s just the context of the question that will differentiate the strategy used IMO. I don’t recall the text providing very clear examples on how to differentiate these strategies but I could be wrong, its been a while. I actually remember having this same question last year myself - I’ll look at my notes again when I get home to see if I’ve forgotten something, but off the top of my head these are my thoughts. Sorry if thats not much help.