What is the difference between equitizing long short and alpha beta separation approach?

Paraguay Wrote:
——————————————————-
> It’s portable two ways.
>
> One I have a manager that is long/short market
> neutral on the Russell 2000 and consistently earns
> 4% in every environment because he is a great
> manager. I use his 0-beta portfolio and buy
> futures or ETF’s to go long SPX now I have SPX +
> 400bps of alpha on a yearly basis, much better
> than a simple alpha strategy on the SPX because I
> used the best long-short manager.
>
> Otherwise I find a manager that is great in say
> FTSE Indexed stocks and generates 200bps of alpha
> on a yearly basis. I short FTSE futures and go
> long SPX futures. Now I have SPX + 200 bps even
> though the alpha came from the FTSE and not SPX.
+10. Thanks this clears up that question on sample 2 for me. I got it right through similar reasoning, but I still wasn’t able to explain it that well.
 
so just to make things clear, in the book on page 261
for investors that are precluded from investing on a long- basis the solution is.
investor desires S&P 500 market exposure but has identified a capable manager of Japanes equities benchmarked to the topix index.
the investor can port the managers alpha by taking a short futures positon in topix and a corresponding long position in S&P futures.
- short position in topix = where is alpha here???
(in paraguays statement it said long and then also short)
- long position in S&P 500 = beta
 
Gotta be honest, i don’t think there is any diff between equitizing a long/short, alpha and beta separation, and portable alpha.
 
You must log in or register to reply here.
Back
Top