Absolute Return Overlays: The Power Of Diversification On ReturnsAbsoluteReturnOverlays:ThePowerOfDiversificationOnReturns

Overview

Expected returns on multi-asset portfolios may be improved materially with the implementation of a portable alpha overlay. Unlike other alternative allocations, portable alpha overlays can be implemented without changing underlying portfolio allocations and/or existing active managers. 
 

• A portable alpha overlay can provide an uncorrelated and unfunded separate source of excess returns generated by alpha management. 
   
• A well-designed portable alpha overlay strategy with a low correlation to traditional asset class and private market exposures can provide diversifying, additive returns when asset owners need them most. 
   
• Our case study shows that when an overlay targeting 2% risk is introduced, it can add roughly 1% alpha to a well-diversified portfolio^*. 
   

^*Results not guaranteed