PT  - JOURNAL ARTICLE
AU  - Rudin, Alexander
TI  - How Much Beta Is Just Right? <em>Linking Investment Objective and Portfolio Choice</em>
AID  - 10.3905/joi.2019.1.084
DP  - 2019 Apr 25
TA  - The Journal of Investing
PG  - joi.2019.1.084
4099  - http://joi.pm-research.com/content/early/2019/04/25/joi.2019.1.084.short
4100  - http://joi.pm-research.com/content/early/2019/04/25/joi.2019.1.084.full
AB  - Alpha forecasting for hedge funds is much less reliable than beta forecasting, which explains the proliferation of mostly risk-based portfolio construction processes for alternatives. When implementing those processes, investors are faced with certain strategic choices, including choosing the long-term level of market exposure, or beta, on the portfolio level. There is no universal guidance that drives that choice. That said, we have found that for a particular&—and quite popular&—form of the investment objective, one can develop such guidance, derive analytical expressions for the correct level of market exposure, and create a practical portfolio construction framework that directly links the investment objectives and portfolio choice.TOPICS: Real assets/alternative investments/private equity, portfolio construction, performance measurement