ActiveAllocator Research Drives Locating and Generating Alpha

2- incremental alpha

#ActiveAllocator Research – I was in essence recently asked “Why does ActiveAllocator create public goods by publishing its proprietary research?”. I guess an answer is we are in the business of creating incremental alpha for our clients, and holding on to ideas in a fast moving world is seldom optimal. Here is a visual on how we recently helped a very large public fund – where strategic asset allocation was a small part of our engagement.

Case Study:

Client has an objective to:

– increase returns by 100bps

– lower volatility

– Sharpe ratio of 0.5

Client has made substantial changes to its strategic asset allocation

These changes have the potential to add a great deal of value, although in and of themselves, they will not necessarily meet the above objectives

– Based on ActiveAllocator’s proprietary models, “index-like” returns in each asset  category will achieve approximately 60% of the return objective

To fully meet its objectives, Client will need to

– enhance performance through long-run value-added activities (“offense”)

– minimize ‘slippage’ in the portfolio during the transition period (“defense”)

While accomplishing these objectives will involve connecting a myriad set of puzzle pieces, Client should focus intensively on what may be the most important implementation areas

– enhancing internal alpha generation capabilities

– implementing an alternative investment strategy which maximizes value

– effective portfolio management

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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