History sometimes repeats itself. And in the case of “portable alpha”, a revival is underway in 2024. However, this time it is driven by hedge funds themselves.
Jon Caplis shares some insights with Alex Morrell for Business Insider, on the growing return of “supercharged index investing,” a concept developed in the 1980’s but largely abandoned after the Great Financial Crisis. Given the high interest rate environment, it’s a way to capture exposure to a target benchmark and then supercharge it with actively managed alpha.
Jon notes that many hedge funds are realizing that portable alpha offerings to select benchmarks can help maintain existing clients but also institutionalize their business by providing bespoke solutions to investors.
On the demand side, it’s also a “nice way of smuggling hedge funds into your portfolio if you’re an allocator.”
Will it last when interest rates subside?