Portable Alpha Strategy Sees Resurgence Amid Global Economic Uncertainty
A diversified investment strategy that seeks to juice returns through leverage is gaining popularity among big money managers, more than a decade after it blew up during the 2008 financial crisis. Portable alpha uses derivatives to track returns of long-only indexes and then invests excess cash in trades beloved by hedge funds, such as trend following or market-neutral equity strategies. The approach has been adopted by over 22% of institutional investors, private banks, and family offices with $8.6 trillion in total assets.
- As investors increasingly seek to maximize returns in a stagnant market environment, the resurgence of portable alpha highlights the ongoing quest for alpha-generating strategies that can provide a diversification benefit without sacrificing liquidity.
- How will the growing adoption of portable alpha impact the broader asset allocation landscape, particularly as active managers continue to struggle to beat market benchmarks?