The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

The perils of portable alpha

Investors aren't the only ones finding it hard to make ends meet in a world of low returns. Hedge fund managers are in the same boat. Many of the anomalies they relied on to make returns investing in conventional markets have been arbitraged away. The recent performance of managed futures hedge funds, which trade on market momentum, is indicative. Returns fell 7% in the year to February, according to CSFB/Tremont. Convertible arbitrage funds were down 0.8%; short-bias funds returned just 4%.

Hedge fund managers would like to invest in more esoteric and volatile asset classes, such as emerging markets and distressed debt. These markets are less efficient and so offer more scope for outperformance. Hedge fund returns in these areas have been as high as 14% in the year to February.

But there's a snag. Hedge funds are nowadays increasingly reliant on institutional investors, not just risk-taking wealthy individuals. And these risk-averse investors cannot easily follow funds into riskier markets.

How can hedge funds attract institutional investors while also embracing more ambitious trading strategies? The rocket scientists think they have found a way. They have devised a technique enabling investors to put money into rarefied hedge fund strategies without bearing the additional risk.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree