There’s a new buzz in the asset management business around a concept called portable alpha. Put simply, this states that if a specialist fund manager can generate sustainable outperformance in any given market, it is quite legitimate – even advisable – for a fund to combine this alpha, or excess value, with a core strategic exposure to a quite unrelated market. So if an American pension fund makes a strategic asset allocation to, say, US equities and chooses the S&P500 index as the benchmark to measure its funds against, it does not therefore follow that it has to seek to beat this benchmark by appointing a manager who is clever at picking US stocks.
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