Pennsylvania-based fund-of-hedge-funds firm Attalus Capital has launched a dedicated portable alpha product targeted at institutional investors.
According to Patrick Egan, president of Attalus, the new product, which became available earlier this month, bundles together alpha and beta in order to offer clients one product instead of two. Attalus creates the alpha portion of the product, while Minneapolis-based overlay specialist The Clifton Group builds the beta portion.
The first client for the product, a large institutional investor, which Egan declined to name, has placed $25 million in the strategy. Egan said the dedicated portable alpha product was a result of client demand. "There were a number of clients who mentioned that they would like to do it, but there were a lot of moving parts," he said, referring to most portable alpha products, in which alpha and the beta are each managed as separate products.
Rick Ballsrud, senior portfolio manager at The Clifton Group, said institutions would rather educate their committees on a single product rather than multiple ones. "We have seen a number of clients around the country that have indicated they have wanted one turnkey product," said Ballsrud.
According to Egan, portable alpha can provide excellent returns. "Portable alpha generates a strong outperformance over benchmarks on what we think will be a consistent basis," he said.
"We have generated close to 500 basis points over the S&P since inception in 2000," says Egan, referring to when the firm first began working with The Clifton Group on portable alpha. "They were separate [the alpha and the beta portions], but if you put them together, that is what we got," he added.
Egan says that a side benefit to this product is that it allows institutions to rebalance their portfolios without having to fire any managers.