The Alternative Income Index is outcome-oriented and is comprised of strategies that seek profits from income-generating carry strategies in rates, credit, commodities, and equities.
HFR Bank Systematic Risk Premia Indices - Index Descriptions
The HFR Bank Systematic Risk Premia Indices are a series of benchmarks designed to reflect the performance of the universe of managers that employ a portfolio allocation strategy based on targeting risk levels across the various components of an investment portfolio.
Risk Premia Carry strategies exploit the shape of the futures forward curve by shorting those commodities most contangoed and going long those commodities most backward dated. Risk Premia Carry strategies are constructed by holding long positions in higher yielding assets and short selling lower yielding assets.
A composite of all Bank Systematic Risk Premia Commodity styles.
These strategies seek to profit from the momentum risk premium in commodity markets. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
Risk Premia Commodity Value strategies seek to profit from undervalued commodity futures contracts on an absolute and relative basis using a variety of techniques. Value strategies are constructed by holding long positions in undervalued and short positions overvalued assets based on some valuation model.
Risk Premia Credit Carry strategies seek to profit from long higher yielding credits and shorter lower yielding ones using bonds, ETFs, index credit default swaps, and other credit instruments. Risk Premia Carry strategies are constructed by holding long positions in higher yielding assets and short selling lower yielding assets.
A composite of all Bank Systematic Risk Premia Credit styles
This strategy seeks to profit from the momentum in credit spreads. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
This index includes strategies employing multiple credit strategies. Multiple-Style strategies combine the styles to achieve particular investment objectives. For example, volatility and momentum strategies tend to be negatively correlated, so combining them can create return streams more consistent with less volatility than either style alone.
Risk Premia Credit Volatility strategies exploit the implied-to-realized risk premium in credit options and swap options. Volatility strategies seek to earn the premium available between implied volatility and realized volatility in options markets. These can be implemented by systematically selling delta-hedged straddle options to capture the volatility premium. Where available, shorting variance swaps also provides another way to access this premium.
Risk Premia Currency Carry strategies seek to profit from the forward-rate bias in FX using a variety of methods. Currency carry strategies are constructed by holding long positions in higher yielding currencies and short-selling lower yielding ones.
A composite of all Bank Systematic Risk Premia Currency styles.
This strategy seeks to profit from the momentum risk premium in currencies. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
Risk Premia Currency Value strategies exploit the purchasing power parity risk premium in FX. Value strategies are constructed by holding long positions in undervalued and short positions overvalued assets based on some valuation model.
Risk Premia Currency Volatility strategies seek profit from the implied-to-realized risk premium in FX using options. Volatility strategies seek to earn the premium available between implied volatility and realized volatility in options markets. These can be implemented by systematically selling delta-hedged straddle options to capture the volatility premium.
Risk Premia Equity Carry strategies seek to profit from high dividend stocks. These can be implemented as long-only or long-short portfolios.
A composite of all Bank Systematic Risk Premia Equity styles.
Equity Low Volatility strategies exploit the low-volatility anomaly where low-volatility stocks have higher risk-adjusted returns than stocks in general. These strategies are typically implemented by going long a basket of low-vol stocks and shorting the market against it using stock indices.
These strategies exploit the momentum risk premium in equities. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
This index includes strategies employing multiple strategies in equities. Multiple-Style strategies combine the styles to achieve particular investment objectives. For example, volatility and momentum strategies tend to be negatively correlated, so combining them can create return streams more consistent with less volatility than either style alone.
Equity Quality strategies seek to earn the risk premium associated with stock of companies with low debt, stable earnings growth and other financial indicators of quality versus stocks in general. A quality portfolio can be created by going long companies with stable earnings, etc. and shorting instruments reflective of broad market indices against it.
These strategies seek to profit from the value risk premium in equities. Value strategies are constructed by holding long positions in undervalued and short positions overvalued assets based on some valuation model.
Risk Premia Equity Volatility strategies seek to profit from the implied-to-realized risk premium in equities. Volatility strategies seek to earn the premium available between implied volatility and realized volatility in options markets. These can be implemented by systematically selling delta-hedged straddle options to capture the volatility premium. Where available, shorting variance swaps also provides another way to access this premium.
A composite of all Bank Systematic Risk Premia Multi-Asset styles.
These strategies exploit the momentum risk premium across multiple markets. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
Risk Premia Rates Carry strategies seek to profit from the yield curve carry risk premium. Risk Premia Carry strategies are constructed by holding long positions in higher yielding assets and short selling lower yielding assets.
A composite of all Bank Systematic Risk Premia Rates styles.
These strategies seek to profit from momentum in rates. Momentum strategies are based on technical signals and tend to be long assets whose price recently appreciated, and short assets whose price depreciated.
These strategies employ multiple strategies in rates. Multiple-Style strategies combine the styles to achieve particular investment objectives. For example, volatility and momentum strategies tend to be negatively correlated, so combining them can create return streams more consistent with less volatility than either style alone.
Risk Premia Rates Value strategies seek to profit from over and undervalued bonds globally. Value strategies are constructed by holding long positions in undervalued and short positions overvalued assets based on some valuation model.
These strategies seek to profit from implied-to-realized risk premium in bonds. Volatility strategies seek to earn the premium available between implied volatility and realized volatility in options markets. These can be implemented by systematically selling delta-hedged straddle options to capture the volatility premium. Where available, shorting variance swaps also provides another way to access this premium.