130/30 Investing: Just Another Hype or Here to Stay?

16 Pages Posted: 14 May 2008

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Date Written: May 14, 2008

Abstract

By having the flexibility to take on short positions, so-called 130/30 funds provide classic beta exposure in combination with an enhanced potential for generating alpha. We discuss the main theoretical pros and cons of 130/30 investing and compare various ways in which 130/30 funds are being constructed in practice. We conclude that a 130/30 approach potentially offers significant efficiency gains, but that sufficient alpha generating capability is required to actually capitalize on this potential, especially on an after-cost basis. We are skeptical with regard to 130/30 equity funds that do not attempt to create an integrated 130/30 portfolio, and also with regard to several recent variations on the 130/30 theme, such as 130/30 bond funds and 130/30 indices.

Keywords: Portfolio Management, Portfolio Construction, 130/30, Short-Extension, Alpha-Extension, Enhanced Active Strategies, Long-Only Constraint, Short Positions, Alpha, Beta, Equity Strategies, Hedge Fund Strategies, Alternative Investments, Hedge Fund Strategies

JEL Classification: G11, G23

Suggested Citation

Blitz, David, 130/30 Investing: Just Another Hype or Here to Stay? (May 14, 2008). Available at SSRN: https://ssrn.com/abstract=1132940 or http://dx.doi.org/10.2139/ssrn.1132940

David Blitz (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

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