Alpha and beta separation (Portable alpha)

this appears to be an overlay of 2 strategies. what is so special about the combination ?

Its basically a way to get alpha from one market and beta from another. Say your asset allocation calls for an allocation to large cap stocks but you feel that the large cap market is too efficient to generate alpha. You can invest so that you get the beta from large cap stocks but pick another, less efficient market in which to earn beta (small cap stocks, for instance) so that you can still try to get excess return without exposing the investor to an inappropriate amount of systematic risk (for example).

To add to already excellent post by Aimee. Portable alpha can be added to any portfolio. Investor A wants to have high exposure to European stocks, investor B wants to have exposure to gold. Potentially, both can benefit from a portable alpha portfolio that can be derived somewhere else.

Whoops, that was supposed to be “another, less efficient market in which to earn ALPHA”

Thank you both for the replies. So each part can be viewed as a separate strategy ? In other words, chasing alpha with small caps with a long futures position ? and gaining beta from an unrelated investment in a market neutral strategy ?

there’s a good thread on this vs the other equity strategies from last month:,1133603,1135033#msg-1135033