With all the recent talk among pension plan, endowment and foundation executives about adding alpha to portfolios, Doug McCalla, chief investment officer of the $4.6 billion San Diego City Employees' Retirement System, thought he'd put in a few words for beta.
Referring to a recent conference, Mr. McCalla said, "(It) had a high focus on generating alpha, which in the big picture is a marginal added source of total return to a pension fund. I was inspired to creatively remind attendees of the importance of effectively managing the underlying sources of beta, which provides the vast majority of total pension fund total return over time."
"The Asset Allocator's Prayer" is a takeoff on Psalm 23, he said. Mr. McCalla recited the poem as a panelist at the Financial Research Associates "Leading Strategies, Leading Returns" Conference held in San Francisco on Oct. 22-25.
"The Asset Allocator's Prayer"
By Doug McCalla (with apologies to the author of the 23rd psalm)
Beta is my brother,
I shall not want;
He makes me lie down in profitable pastures.
He leads me besides transparent and liquid investments.
He restores my rebalancing opportunities.
He leads me in paths of diversification for his name's sake.
Even though I walk through the valley of "The Hope for Alpha,"
I fear no specific risk,
For Beta is with me;
His correlations and standard deviations, they comfort me.
Surely goodness and mercy shall follow me all the quarters of my career;
and I shall dwell in the house of Beta forever.