RT Journal Article
SR Electronic
T1 Portable Alphas from Pension Mispricing
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 44
OP 53
DO 10.3905/jpm.2006.644193
VO 32
IS 4
A1 Francesco Franzoni
A1 José M. Marín
YR 2006
UL https://pm-research.com/content/32/4/44.abstract
AB Between 1989 and 2004, a portfolio based on the systematic mispricing of U.S. companies sponsoring defined-benefit pension plans produced a monthly average excess return of 1.51% and a Sharpe ratio of 0.26 monthly. The returns of this strategy are not explained by those of the primary assets, nor are they related to most of the benchmarks in the alternative investments industry either. Two striking properties of this “pure alpha” strategy are that its returns are negatively correlated with credit spreads and that it does reasonably well in tumultuous times, making it an attractive investment as a hedge for the risks of default and illiquidity.TOPICS: Security analysis and valuation, portfolio construction, long-term/retirement investing