GREENWICH, Conn. — The chase for alpha, which took hold in 2005 amid generally flat capital markets, is expected to grow this year as pension plans, foundations and endowments continue to shift assets away from traditional stocks and bonds into areas with higher return potential such as international equities, real estate, hedge funds and private equity.
According to a report by Greenwich Associates Inc. to be released April 3, more institutional investors are also planning to employ portable alpha and absolute-return strategies to bolster returns.
"The asset allocations are shifting so that more assets are moving into alternative investments," said Dev Clifford, consultant at Greenwich, Greenwich, Conn. "We're also seeing a larger move into portable alpha and absolute-return strategies. It's part of the overall theme of maximizing alpha and minimizing beta."
He said the "theme" is in its infancy, as institutions continue to struggle to improve performance while returns on stocks and bonds remain subpar.
The annual Greenwich report of asset allocation trends also found that while pension plans, endowments and foundations remain squarely focused on using innovative strategies to generate above-market rates of return, mark-to-market accounting rules being considered by the accounting industry and regulators could affect financial markets more than any alpha-generating strategy.