Portable Alpha

Portable Alpha - The term portable alpha refers to a management strategy where an investment manager collects together a group of investments together in what is called a portfolio. If the investment manager is particularly skillful, he will use a variety of techniques such as futures, swaps and options or short selling to reduce or eliminate the market risk. If the investment manager successfully manages this portfolio so that the movement of the market does not have a negative effect on his profit he is said to have alpha return as opposed to beta, which would be representative of the market. It becomes portable when the extra returns are separated from the market by hedging the market exposure of the portfolio.