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Alternative Market Briefing

The four different types of investor that are interested in alternative risk premia

Wednesday, August 09, 2017

Komfie Manalo, Opalesque Asia:

Investment consultancy firm bfinance said it has identified different types of investor that are interested in alternative risk premia (ARP) with each approaching the space from a different perspective.

Speaking at the latest Opalesque 2017 UK Roundtable, Dr. Toby Goodworth said that the areas of focus of these investors can vary considerably.

Goodworth explained ARP generally, "Alternative risk premia investing requires a somewhat different mindset; it's not the conventional strategy allocation mindset, rather a risk factor framework which crosses multiple asset classes in one style. For a lot of investors this is a new concept which is often, incorrectly, associated with pure 'black box' quant investing."

He continued saying that a lot of education is required to get people comfortable with the ARP space. For example, the first aim would be to dispel the myth that all risk premia investing is 'black box'. In fact, much of the space is academically well established, and those premia that are less established academically are mostly well understood empirically as 'practitioner premia', and in effect, tried and tested over many years.

Goodworth presented the four types of risk premia investors as:

1) Investors using risk premia as a complement to a broader hedge fund portfolio, often in a core sa......................

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