Beta / Alpha: why to chose?
ALPHA needs time to generate returns. The diversity of today’s strategies is unprecedented. Quantamental helps to navigate across asset classes and cycles.
Wealth Management Style
Wealth Management must digest new metrics and portfolio management style to become agile and robust in a more challenging world when Central Banks try to tight financial conditions.
Two methods to allocate alternative strategies and manage the Alpha:
- Mirrored the Beta asset allocation
- Create a complete independent Term Structure via Alternative investments.
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The chart compares a legacy allocation with two newer ways to allocate alternative strategies.
The legacy allocation stacks cash, fixed income, equity and an alternative bucket of real estate, private equity and hedge funds.
"Mirrored Alpha" keeps the same structure but splits each layer into a listed and an unlisted part: duration and credit (smart beta and fixed beta, or private credit and direct lending), equity (smart beta, or private equity) and an idiosyncratic, uncorrelated layer (liquid hedged multi-asset, or real-assets debt and equity).
"Alpha Term Structure" keeps cash, fixed income, equity and alternatives, and adds a term structure of alternative investments: 0–2 years (EMTN micro finance, SPACs, CTA and long/short hedge funds), 2–5 years (global macro hedge funds, private debt, private equity buyout) and 5–10 years (real estate, private equity, direct investments).
Institutional Style
Core-satellite management has its origins in the desire to separate the part of the portfolio allocated to the achievement of a main objective of return (Core) from that which aims to generate higher or decorrelated returns (Satellite) from the Core.
Thus, the Core-Satellite approach is primarily intended to replicate market performance (beta) at its core level while at the same time benefiting from active management focused on the creation of added value (alpha). GATE Capital Management allows our client an agile and adaptative Core-Satellite investment allocation.
More about this image
The chart sets a legacy allocation (cash, fixed income, equity, and alternatives in real estate, private equity and hedge funds) beside two satellite structures.
In "Core – Satellite", GATE Macro Allocation sits at the centre, surrounded by satellites: private debt, private equity, a thematic fund, hedge funds, real assets, ESG, impact investing and micro finance.
In "Pure Satellite", the client's own asset allocation is at the centre, and GATE Macro Allocation becomes one satellite among the same others.
Satellites marked with an asterisk are selected or powered by GATE Capital Management SA.