Leveraged alpha: Difference between revisions
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{{a|buzz|}} | {{a|buzz|}}[[Snake oil]], basically. | ||
[[Leverage|Leveraging]] [[alpha]] is technically possible, but in practice --- yeah. | [[Leverage|Leveraging]] [[alpha]] is technically possible, but in practice --- yeah. | ||
What most | What most [[hedge fund]] manager claim to be [[leveraged alpha]] is, usually, really plain old [[vega]] - that is, just [[leverage]]. If your market benchmark is beating the risk-free borrowing rate, you ''will'' make money by borrowing. But if it ain’t... | ||
A fellow who pitches a “[[leveraged alpha]]” product to you is most likely a charlatan — you would expect that, it being the financial markets and all — and a mediocre [[fund manager]]. Especially if you see [[backtesting]] to demonstrate ''historical'' [[alpha]]. | A fellow who pitches a “[[leveraged alpha]]” product to you is most likely a charlatan — you would expect that, it being the financial markets and all — and a mediocre [[fund manager]]. Especially if you see [[backtesting]] to demonstrate ''historical'' [[alpha]]. | ||
Latest revision as of 13:30, 14 August 2024
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Lingo update
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Snake oil, basically.
Leveraging alpha is technically possible, but in practice --- yeah.
What most hedge fund manager claim to be leveraged alpha is, usually, really plain old vega - that is, just leverage. If your market benchmark is beating the risk-free borrowing rate, you will make money by borrowing. But if it ain’t...
A fellow who pitches a “leveraged alpha” product to you is most likely a charlatan — you would expect that, it being the financial markets and all — and a mediocre fund manager. Especially if you see backtesting to demonstrate historical alpha.
Go hunting for charlatans here.