Portable alpha

Portable alpha was a silly idea cooked up by salespeople to make hedge funds fit into a traditional "asset allocation". Strategies are NOT assets. If you want to equitize or bondize the alpha from good hedge funds simply buy an index future or swap yourself. Who is verifying that the "alpha" isn't really repackaged beta? There is no need to transport new alpha onto old outdated beta.

Why equitize in the first place? Diversification of return sources is what is necessary. Investors don't need a portfolio of asset classes like stocks, bonds, private equity, commodities, real estate etc. They need strategy classes. Why "undiversify" by adding beta risk. Alpha is alpha and there is no need to make it portable. The performance from well managed hedge funds stands by itself.

If your hedge funds collectively return +10% and the S&P 500 beta overlay drops -40% (as it WILL sometimes), you lose -30%. Dumb. Without the portable alpha transport you get to keep the 10%. Forget about portable alpha and invest in hedge funds the CORRECT way. Relative return is not absolute return.