The 130/30 portfolio: An alpha boost

Abstract

The use of 130/30 portfolios provides an effective way to increase the implementation of manager views. Our analysis of 130/30 performance results in the large cap core area of the domestic equity market over several time periods in the past three years revealed greater dispersion and lower median returns for 130/30 portfolios than similarly managed large cap core portfolios. Despite limited live performance data, we believe the environment that we are entering, one that will be characterized by increasing dispersion among stock returns and fundamentals being rewarded, is advantageous for 130/30 portfolios. We recommend that clients consider making allocations to 130/30 portfolios.


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