Portable alpha

Sponsor Statement

Risk: How would you define portable alpha?Stuart Pyott: First, let’s define alpha. This is the fund manager’s‘value added’ – in other words, the portfolio return over andabove that predicted by the capital asset pricing model. This iskey – just because a portfolio generates an excess return over thebenchmark, it doesn’t follow that a fund manager has generatedpositive alpha. It could be that the increased return is merelycommensurate with increased risk, either through leveragedbeta and/or deriv

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