New York Times – Money managers have been stepping up their search for Wall Street’s holy grail: an investment that consistently generates “alpha.”
While that may just be Greek to people far removed from Wall Street, when money managers talk about alpha, they are referring to investments that make money even when markets are slumping. It is the opposite of beta, the term applied to investments whose returns tend to track the market.
With conventional beta investments in stocks and bonds earning low single digits, a growing list of money managers are pitching an alternative, known as portable alpha. This fancy sounding name refers to a relatively simple strategy: combining an ordinary stock or bond index with something that the investor believes will provide alpha.
If the source of alpha outperforms the stock or bond index, investors in portable alpha strategies, which include large pension plans, figure they are ahead of the game.
