Portable Alpha Strategies

Asset class
Equities, Bonds, ILBs, Global Equities
Equity derivative overlay
Portable alpha
Strategy Size
Strategy Start date
South Africa, Global
Alpha Transport (also called portable alpha) is an investment strategy which allocates portfolio funds to derivatives to mitigate the inherent market risk in the portfolio. A portfolio manager can generate alpha from any asset class through dedicated alpha vehicles and use this process to add value to their portfolio. For example, an investor may have a beta exposure to the bond market but would attempt to generate alpha from the equity market. In this case, the alpha is said to be transported from the equity market and placed on top of the bond portfolio. The principles that underpin alpha transport strategies have been a feature of investment approaches for some time, but their use in asset allocation is relatively new. Broadly speaking, alpha transport strategies involve structuring liquid derivatives baskets to replicate index returns and investing cash outside the index to generate alpha.


Lowering risk
Our portable alpha strategies serve to increase overall portfolio performance and maintain a diversified asset allocation without taking on more risk. This strategy separates a portfolio’s active risk budget from its beta allocation freeing up portfolio capital to seek excess returns in areas of the global financial market where there is a high potential for positive returns. This allows investors to use their portfolio capital optimally.


Manager selection
We work with clients to select alpha-seeking managers who generate positive returns greater than the cost to finance the index exposure.