Allocating to Alternative Investments

A pre-requisite for constructing any great portfolio is identifying skilled managers that an investor believes can consistently generate alpha. Although investors intuitively recognize the value of alpha, they have historically lacked the tools required to build portfolios that include active managers. ActiveAllocator addresses newer challenges by designing a rigorous, integrated and, perhaps most importantly, practical framework for active investing. Extensive testing provides evidence that our framework can significantly improve upon more traditional portfolio construction methods. Our approach is unique in that it:

  1. More accurately measures manager alpha and beta on historical basis.
  2. Explicitly forecasts manager performance by combining historical data with other information.
  3. Quantifies unique risks of active managers.
  4. Accounts for these unique risks when constructing portfolios.

While the details of this approach are outside the scope of this note we summarize the general characteristics of alternative investments here.

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech ActiveAllocator.com, 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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