medium · FRM Part 2 Risk & Investment Management
In the 'alpha-beta separation' argument, why might a pension fund restructure its manager lineup to pay active fees only for 'genuine' alpha?
- Because passive exposure to systematic beta is inherently more volatile than alpha.
- To strip all systematic market risk out of the pension fund's portfolio.
- Because true alpha is assumed to be positive in every single year.
- Because systematic factor exposure can be replicated at much lower cost.
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