Crowd Sourced Alpha: The Search for the Holy Grail of Investing    

By Fortune Chiwewe

For the full presentation on crowd sourced alpha by Dr Jessica Stauth, Click Here, For the Slides, Click Here. Dr Stauth opened with a quote by Ray Dalio which pretty much sums up the fundamental objective of portfolio investment and diversification: “uncorrelated return streams are the holy grail of investing.” Traditional portfolio theory states that to achieve true diversification adding more assets or return streams to your portfolio leads to a better Sharpe ratio and more diversification only to the extent that the assets you add are truly new and not more of the same. The traditional model fails to achieve this because

  • Positive Sharpe streams are a moving target which require on-going research
  • Most investment teams lack diversity in terms of expertise and background making it challenging to surface new uncorrelated strategies
  • Large multi-manager firms are successful BUT the barriers to entry to these large firms industries are extremely high

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