Modern Portfolio Management: Active Long/Short 130/30 Equity Strategies

Modern Portfolio Management: Active Long/Short 130/30 Equity Strategies

by Martin L. Leibowitz, Simon Emrich, Anthony Bova
     
 

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"Investment professionals know that performance is determined not just by their overweights, but also by the positions that they choose to underweight." With this brief statement, Martin Leibowitz captures the essence of what both institutional and individual investors must accomplish for active risk-taking to achieve superior results.

In order to find consistent

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Overview

"Investment professionals know that performance is determined not just by their overweights, but also by the positions that they choose to underweight." With this brief statement, Martin Leibowitz captures the essence of what both institutional and individual investors must accomplish for active risk-taking to achieve superior results.

In order to find consistent alphas and outperform the market, investors must "think outside the benchmark" in the construction of their portfolios—without taking on too much risk. Active 130/30 extensions, says Leibowitz, can provide the solution. With the growth in active extension (AE) funds over the last few years, the lines have been blurred between traditional equity and what is considered alternative equity. The basic motivation behind the active extension initiative has been the desire for more alpha return without taking on directional leverage or moving too far from traditional equity management.

With its beta-one equity risk, its 100% net long base, and its clearly delineated alphas, AE can be viewed as an "incremental" expansion of standard long-only active equity. Indeed, it is these familiar and comfortable features that enable AE strategies to be kept within the basic equity allocation rather than being thrust into the generally smaller allocation dedicated to "alternatives." In addition, 130/30 products have brought transparency into the world of long/short investing, introducing another way to improve governance in the asset management industry.

In Modern Portfolio Management, Leibowitz and his coauthors offer new strategies for institutional investors who want to manage their portfolios more actively by using 130/30 investment techniques. The 130/30 framework is a natural extension of the basic long-only benchmark-relative strategy that is so widely practiced. This approach seeks to exploit the opportunities that exist between the more efficient long only market and the less efficient short market. This book shows how 130/30 strategies allow asset owners and asset managers to more fully exploit an active manager's information set. The in-depth ideas presented in this volume also go well beyond the strict confines of 130/30's to shed important new light on other types of active management, including fundamental and quantitative long-only as well as the various forms of more flexible long/short funds. Modern Portfolio Management offers institutional investors many insights and exciting new ways to think about alpha generation.

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Product Details

ISBN-13:
9780470398531
Publisher:
Wiley
Publication date:
01/09/2009
Series:
Wiley Finance Series, #488
Pages:
511
Product dimensions:
6.40(w) x 9.10(h) x 1.90(d)

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