Alternative Beta Live

Have long-short alternative beta (style premium) strategies worked well in practice? In their February 2019 paper entitled “A Decade of Alternative Beta”, Antti Suhonen and Matthias Lennkh use actual performance data to assess alternative beta strategies across asset classes from the end of 2007 through the end of 2017, including quantification of fees and potential survivorship bias in public data. Specifically, they form three equal volatility weighted (risk parity) composite portfolios of strategies at the ends of each year during 2007-2016, 2007-2011 and 2012-2016. Each portfolio includes all the strategies launched during the first year and then adds strategies launched each following year at the end of that year. When a strategy dies (is discontinued by the offeror), they reallocate its weight to surviving strategies within the portfolio. They also create two additional portfolios for each period/subperiod that segregate equities and non-equities. They further evaluate alternative beta strategy diversification benefits by comparing them to conventional asset class portfolios. Using weekly post-launch excess returns in U.S. dollars for 349 reasonably unique live and dead alternative beta strategies offered by 17 global investment banks, spanning 14 styles and having at least one year of history during 2008 through 2017, they find that:

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