The rise of alternative beta

Hedge fund investments have become a standard part of asset allocation due to their attractive diversification benefits. As a result, academic interest in their sources of return has intensified. Such literature has increasingly been able to describe the return drivers behind a wide range of hedge fund styles as there typically exists common risk exposures shared by hedge fund managers pursuing similar strategies. Since these return drivers are systematic in nature, they have been termed alternative beta – or sometimes, exotic beta. More specifically, alternative beta is defined as th...