Jordan Wruble, Head of the Investment Solutions group at Brown Advisory, is seeking investment strategies that strike a balance between closely tracking market benchmarks and delivering added performance, known as “portable alpha”, according to a report by CityWire.
“We’ve been exploring approaches that combine active management with low tracking error,” Wruble told Citywire. “These strategies aim to replicate benchmarks while incorporating some volatility and tracking error, allowing the core portfolio to still align closely with the index.”
As the leader of Brown Advisory’s Investment Solutions group, Wruble oversees due diligence for approximately 100 mutual funds, separately managed accounts (SMAs), and hedge funds recommended to private clients, including individuals, families, endowments, and foundations. His team is also responsible for selecting sub-advisors for four funds, including the $138m Brown Advisory – WMC Japan Equity Fund. Research into private market funds is handled by a separate team.
With $167bn in total AUM, Brown Advisory’s interest in portable alpha reflects a growing trend in the investment world. The strategy involves blending index-tracking investments with active, uncorrelated components designed to generate excess returns. The “portable” aspect refers to the alpha being independent of the benchmark, making it transferable across portfolios.
A recent survey by BNP Paribas highlighted the rising popularity of this approach, with 40% of hedge fund investors already using or planning to adopt portable alpha strategies. The survey covered 200 investors managing roughly $1.4tn in hedge fund assets.
“This tool allows portfolio managers to implement active strategies and pursue alpha without significantly compromising benchmark alignment,” Wruble explained, while emphasising the risks of active strategies that deviate too far from benchmarks, pointing to the challenges faced by some in 2024.
“We love active management — bottom-up, fundamental, long — but last year demonstrated the potential pitfalls of being underweight in concentrated markets,” he said.
While hedge funds are the primary players employing portable alpha, Wruble noted that the strategy is less common in liquid markets. “It’s unlikely to be a sub-advisory candidate for now, but you never know,” he added.
