Leveraged alpha: Difference between revisions

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{{a|buzz|}}{{t|Snake oil}}, basically.  
{{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 {{tag|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...
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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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.