Hi everyone,
Thanks for taking the time to read this!
On page 221 of the Fixed Income book (2016) at the very bottom… it explains that portable alpha can still be used if an investor is restricted from using a long-short strategy…
The example says the investor desires S&P500 exposure but identifed a Japanese alpha manager who’s benchmark is the TOPIX index
The portable alpha would work by longing S&P and selling TOPIX futures…
Can someone please explain the intuition behind this? Why are you selling TOPIX? Is it because the investor is also going long the Japaense manager alpha portfolio then selling TOPIX to get rid of the Japanese systematic risk? That is not clear.
Appreciate your time and help! Thanks.