A “common sense approach for those who believe in active management”
Lance on May 05 2008 at 12:49 pm | Filed under: Alternative strategies, benchmarks
That is All About Alpha’s assessment of 130/30 funds (definition here.) Which seems about right to us.
Few active managers, even if they actually outperform their benchmarks, can overcome the expenses associated with doing so. The reason is not necessarily that they cannot do a good enough job of picking investments that can outperform, but that constrained to only going long they can’t make a big enough bet on what they like, or don’t like, to move the needle sufficiently! Here is a nice examination of this issue.
The Alpha male has several nice posts up on this in addition to the ones above. On appropriate benchmarks:
After launching 130/30 index, S&P says best yardstick is actually a long-only index and Survey of hedge fund professionals: 130/30 “minor discussion within larger context”
The evolution of these vehicles:
The new face of 130/30? and Reality Check: “130/30? and “quant” not synonymous
For a discussion of the actual alpha that theoretically might be received by investors read this post on an interesting study:
Most importantly, for those unfortunate enough to have been exposed to Chuck Jaffe’s execrable column on 130/30 strategies (or their brethren) I recommend Media turns hostile: 130/30 now “dubious” “overblown” “faddish” “hype”. The Alpha Male is more generous with Jaffe than I would be, but that is probably a good thing.
Thanks for visiting Risk and Return. Please feel free to contact us with any questions and/or comments. Please note our disclaimer.
