Bloomberg Indices
Benchmarking Alternative Risk Premia
The use of systematic investment strategies to obtain exposure to alternative risk premia increased considerably in the last decade as investors sought new ways to diversify their portfolios’ primarily equity and fixed income market risk exposures. Investors can now access a wide array of transparent, rules-based strategies to complement alternative investments in hedge funds. These strategies include investment styles such as carry, value and trend and span multiple asset classes including equities, fixed income, currencies and commodities (see Factor Investing and Risk Allocation: From Traditional to Alternative Risk Premia Harvesting, 2017).
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Key Research Topics
- There is an increasing perception that the “liquid alternatives” space has matured and that many of these strategies are well understood and widely utilized, but lack an appropriate benchmark for asset allocation or other comparison purposes.
- We discuss how a family of alternative risk premia strategies can be constructed into a portfolio that could serve as a benchmark in asset allocation exercises.