Understanding The Beta In ALFA

May 19, 2016

This selective hedging, while optimistic in its goal, opens the fund up to whipsaw risk, as can be seen in ALFA’s performance over the first few months of 2016.

Source Yahoo Finance. Analysis by Newfound Research. Data through 4/30/2016.

From the middle of February, ALFA, which had until that point tracked the SPDR S&P 500 ETF Trust (SPY | A-97), began to diverge significantly as SPY rebounded. ALFA had a hedged position for the entire first quarter. Without even looking at the fund holdings or its fact sheet, we can see this by looking at ALFA’s rolling beta, which has dropped recently.

Source Yahoo Finance. Analysis by Newfound Research. Data through 4/30/2016. Data begins on ALFA’s inception date (5/31/2012).

Unfortunately, its alpha has also dropped in tandem.

Source Yahoo Finance. Analysis by Newfound Research. Data through 4/30/2016. Data begins on ALFA’s inception date (5/31/2012).

 

ALFA doesn’t seem to be living up to its name.

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