The BenchmarkPlus Real Alpha™ investment process seeks to discover fund managers that we believe are exceptionally skilled at exploiting one or more market inefficiencies and have demonstrated competitive advantages that allow them to produce consistent alpha.  We utilize a proprietary benchmarking process for each fund manager that allows us to properly assess their alpha-producing capabilities. The goal is to create a diversified alpha engine with insignificant correlation to market indices and low correlation to other hedge funds. Our Market Neutral and Enhanced Index / Portable Alpha products are built on this foundation.

Sourcing Alpha Rich Investment Opportunities

Our investment process seeks to uncover exceptionally skilled managers capable of consistent alpha production. We invest with managers who we believe actively exploit market inefficiencies and demonstrate a clear competitive advantage in capitalizing on those opportunities. In our experience, there are parts of the capital markets where inefficiencies exist, preventing "price" and "fair value" from converging, resulting in mis-pricings and dislocations. We believe these discrete corners of the securities markets are the areas where profitable, asymmetric investment opportunities can be found. We also believe that managers who seek to exploit clearly identifiable opportunities have the highest probability of producing alpha.

Monthly expected alpha contributions are closely monitored and outliers are thoroughly researched and documented. Regular Investment Committee meetings serve as the forum for continuing dialogue regarding all aspects of our products. The search for new managers and frequent regular meetings with current managers is an ongoing part of our investment, due diligence and risk management processes.

What is “alpha”  and how do you know if your hedge fund manager is actually delivering any?  At BenchmarkPlus, we define alpha as a manager’s excess return over a benchmark that accurately reflects the systematic exposures within their portfolio.  By attempting to accurately define an appropriate benchmark, we endeavor to define and measure the components of a manager’s return and identifiable risk exposures (alpha and beta). 

An effective benchmarking process will answer several key questions:

• ·    Why does the opportunity the manager is exploiting produce alpha?
• ·    Which managers produce the most alpha?
• ·    Who produces alpha on the most consistent basis?

Answers to these questions require not only a sound quantitative foundation; they also require a thorough knowledge of the strategy the manager is undertaking and the ability to reconcile the differences between realized returns and the manager’s projected results.  We believe, an effective benchmark provides a pragmatic solution for grasping the nature and extent of the systematic risks within a portfolio.  Additionally, the benchmark provides an objective standard for evaluating the pattern of performance, its reasonableness as well as consistency with the manager’s stated investment philosophy and objectives.

Constructing "Outcome Oriented" Portfolios

The benchmarking process provides us with actionable information that can be incorporated into a risk management overlay: a mechanism that seeks to protect against adverse market moves that may overwhelm the alpha production of the portfolio. While the primary purpose of our risk management protocol seeks to avoid losses attributable to market moves (similar to, but more encompassing than a tail-hedging program), it also has the potential benefit of reducing the volatility and market correlation of our investment solutions.

We utilize an alpha based optimization process that seeks to diversify any remaining common factor exposure that could negatively impact our portfolios during periods of market stress. This forward-looking optimization process seeks to create portfolios that offer a strong combination of underlying managers with high expected alpha at an acceptable level of expected volatility.

Targeting the desired outcome of our end investors, comprehensive solutions are constructed with the use of derivatives and other market instruments. Customized solutions cost-effectively combine alpha and beta sources delivering a portfolio purposely structured to meet our investor's complex and unique needs.

Delivering Customized Portfolio Solutions

For nearly two decades, BenchmarkPlus has been managing alpha-centric hedge fund based portfolio solutions. Core products include low volatility market neutral funds of hedge funds and our enhanced index platform offerings. 

Our unique investment process allows us the flexibility to create customized solutions targeting specific market sectors or outcome oriented portfolios. Expanding into the replication space, there are tracker portfolios that have historically matched the returns and risk attributes of their respective index while exhibiting extremely low tracking error. Partnering with end clients, we can build comprehensive portfolios combining the best manager and trade ideas that our deep and experienced research team see on a daily basis.