RT Journal Article
SR Electronic
T1 How Much Beta Is Just Right? <em>Linking Investment Objective and Portfolio Choice</em>
JF The Journal of Investing
FD Institutional Investor Journals
SP 67
OP 74
DO 10.3905/joi.2019.1.084
VO 28
IS 4
A1 Alexander Rudin
YR 2019
UL https://pm-research.com/content/28/4/67.abstract
AB Alpha forecasting for hedge funds is much less reliable than beta forecasting, which explains the proliferation of mostly risk-based portfolio construction processes for alternatives. When implementing those processes, investors are faced with certain strategic choices, including choosing the long-term level of market exposure, or beta, on the portfolio level. There is no universal guidance that drives that choice. That said, the authors have found that for a particular—and quite popular—form of the investment objective, one can develop such guidance, derive analytical expressions for the correct level of market exposure, and create a practical portfolio construction framework that directly links the investment objectives and portfolio choice.TOPICS: Real assets/alternative investments/private equity, portfolio construction, performance measurement