Morgan Stanley Announces αltera

An Improved Platform for Alternative Investment Replication Strategies


Morgan Stanley (NYSE: MS) announced today the launch of αltera, a new investment platform that will give investors access to ‘alternative beta’ strategies through mutual funds or customized contracts. αltera will draw on the intellectual capital from many areas of the Firm.

“This product will give our clients access to Morgan Stanley’s best trading strategies across asset classes and allow them to benefit from the multiple sources of quantitative and derivative expertise we have available,” said Kevin Woodruff, Head of North America Equity Derivatives.

Offering key innovations compared to first-generation hedge fund replication products, αltera aims to achieve industry-leading performance. “Our objective is to match the performance of a leading benchmark hedge fund index,” said Yazid Sharaiha, Global Head of Quantitative and Derivative Strategies. “In backtests, the αltera model achieves this performance objective while at the same time offering improved liquidity, controlled turnover and more transparency than an actual hedge fund.”

Superior Investment Strategies and Advanced Quantitative Methodology
Morgan Stanley’s αltera improves upon first generation products by using tailor made, high performance investment strategies. Backtests demonstrated that αltera’s choice of strategies improved hypothetical returns when compared to those used by existing products.

Another αltera innovation is an advanced quantitative methodology that both increases returns and reduces risk compared with existing products. According to Patrick McAllister, Head of North America Quantitative Equity Product Origination, “αltera’s methodology is especially valuable around market turning points, offering the possibility of better results than first-generation products at these critical times.” Morgan Stanley plans ongoing research and continuous improvement in quantitative methods for αltera.

MSCI Hedge Fund Index Benchmarks
Another differentiating factor is αltera’s use of MSCI’s Hedge Fund Indices as benchmarks. The MSCI Hedge Fund Indices facilitate detailed performance measurement and attribution due to their flexible design and use of MSCI’s granular Classification Standard for categorizing hedge funds. Furthermore, Morgan Stanley plans to extend αltera to cover selected single strategy indices in the future in addition to the composite.