The investment industry loves jargon. Rather than communicating ideas in a succinct manner, jargon is instead used to create a roadblock to understanding, often to disguise the value or uniqueness (or lack thereof) of a strategy. Unfortunately, the “Alternative Beta” space is particularly rife. And somewhat perversely, we believe the increasing acceptance of alternative beta investment strategies is leading to a worsening of the situation.
A clear and concise definition of Alternative Beta is required, put simply we define Alternative Beta as:
Products that invest in well understood, diversifying long/short investment strategies that seek to exploit behavioural effects and risk premiums.
These products (or funds) will have low exposure to traditional markets by the long/short nature of the implementation of the underlying strategies. As such we believe these products are, in general, excellent diversifiers to existing market exposures in a portfolio.
The products contain investment strategies that are well understood and widely recognised by investment professionals. These strategies aim to earn returns by exploiting market mispricings arising from behavioural effects, capturing risk premiums, or both.
Please see the below document for some examples of these strategies.
Disclaimer
Willis Towers Watson has prepared this material for general information purposes only and it should not be considered a substitute for specific professional advice. In particular, its contents are not intended by Willis Towers Watson to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. As such, this material should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice.
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| Title | File Type | File Size |
|---|---|---|
| Defining alternative betaPDF | 1MB |