Notes of Advantage Alpha Capital's Raj Moorthy from the 2020 SohnX San Francisco Conference.
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Raj Moorthy of Advantage Alpha Capital
- What happened to alpha
- Erosion in long short
- Narrow strategies
- Can’t continue doing what everyone is doing
- Go where the alpha is
- Find the inefficiencies
- Found it in small cap
- Most investors know this
- Most share of capital is in mid and large caps
- 2 constraints of small cap
- Illiquidity, hard to buy and sell at scale
- Extreme volatility
- How to exploit
- Dispersion in quality and returns
- EBITDA margin as a proxy for quality
- Filter for quality
- No value or growth
- Fundamental driven quality, not quant driven
- Company by company
- 70-80 in portfolio
- Not concentration driven alpha
- Address illiquidity
- Differentiating for quality generates around 7% alpha
- The market environment doesn’t...
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