What is Alternative Risk Premia and Why are Investors Excited About It?

While systematic investing has origins in academia dating back to the 1950s, only in the past several years has it evolved into practical applications for portfolio construction. In this episode, Heather Shemilt and Tom Leake of the Goldman Sachs Securities Division explain how ARP strategies work and the diversification and customization benefits they offer investors. "Alternative risk premia, or ARP, are long/short strategies that are designed to generate positive returns in exchange for an investor taking risk," Shemilt explains. "These strategies are seeking to provide persistent exposure to these factors or risk premia, such as carry value or momentum...What's interesting is that ARP can be systematically harvested across all of the asset classes." Also in the episode, they discuss how the ARP industry will continue to evolve, including the impact of big data, AI and machine learning on these strategies, with Leake acknowledging adoption of these technologies is still in "early days."

This podcast was recorded on May 15, 2019.

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