Leveraged alpha: Difference between revisions
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{{a|glossary|}}Snake oil, basically. | {{a|glossary|}}{{t|Snake oil}}, basically. | ||
[[Leverage|Leveraging]] [[alpha]] is technically possible, but in practice --- yeah. | [[Leverage|Leveraging]] [[alpha]] is technically possible, but in practice --- yeah. | ||
Revision as of 16:07, 9 November 2019
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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.