Hunting for Alpha Hunters in the Currency Jungle

摘要

When equity markets are churning out double digit returns and fixedincome markets offer normal yields or declining rates, institutionalinvestors can be somewhat relaxed. They can earn reasonable absolutereturns with conventional strategies. “Beta grazing” goes along way without much need to look for exotica.1 Put differently, whentraditional assets are likely to provide reasonable returns, the needfor so called alternatives is less urgent. But when expected returns inequity markets seem slight and fixed income has been overrun by scaredrabbits looking for safety or a small yield-to-maturity, things aredifferent. What should institutional investors do to satisfy their needfor more acceptable absolute rates of return?2 In such an environment,the marginal contribution of alpha hunting is far greater. It goesbeyond the desire to diversity into the necessity to earn a criticallevel of absolute return.