It's not all alpha - what identifying hedge fund risk premia means

2011 Conference - Due Diligence Forum |  AQR Capital Management  |  25 August 2011

Alpha is shrinking - that’s good news. Alpha is simply the portion of a portfolio’s returns unexplained by exposure to common risk factors. As these are identified, alpha shrinks. This Due Diligence Forum Research Paper, presented at the 2011 PortfolioConstruction Forum Conference, argues that risk factors underpinning classic hedge fund trading strategies - hedge fund risk premia - are investable and can enhance portfolio construction and risk manag...