Sunday 9 May 2010

Leveraged Alpha

Snake Oil, basically.
Leveraged alpha is technically possible, but in practice harder to find than the proverbial West Coast Pub on Anzac Day. 
what most people claim to be leveraged alpha is, usually, really plain old vega - that is, just leverage. If your market benchmark is beating the borrowing rate, you will make money by borrowing.
If someone pitches "leveraged alpha" product to you, they are most likely a charlatan - which you would expect, it being the financial markets and all - and a mediocre manager. Especially if they use backtesting to demonstrate their historical alpha.

Go hunting for charlatans here

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