By Katie Gilbert
Few investment strategies have taken as much heat since last year’s crash as portable alpha, which pension managers employed in recent years in an effort to create enhanced index returns. Unfortunately, many have learned that there is no free lunch after all and have been dumping portable alpha in droves.
That’s exactly what happened with the $2.6 billion Fire and Police Pension Association of Colorado in Greenwood Village, Colo., which decided in August to wind down its portable alpha program. It’s not giving up on hedge funds, however; instead, it’s rolling over the fund of hedge funds used in its portable alpha exposure to a much bigger absolute return allocation.
Portable alpha is created when managers invest in market index futures, which require only a small cash margin, then use the excess money to invest in strategies they believe will boost those...
