AlphaSimplex Group, LLC (AlphaSimplex) is an investment research and management boutique serving the needs of financial advisors, investment providers, and institutions. We focus on the dynamic relationship between risk and return in financial markets, and employ a proprietary risk-control technology, AdaptiveVolatility Management® (αvm®), to shield investors from the disruptive effects of surging risk and extreme loss.¹ AlphaSimplex is registered with the Securities and Exchange Commission as an investment adviser.
AlphaSimplex was founded by Dr. Andrew W. Lo, author of the Adaptive Markets Hypothesis (AMH) – a framework for understanding financial market dynamics that reconciles Efficient Markets Theory with behavioral finance anomalies. AMH is the firm’s core investment philosophy and the basis of its investment strategies. AMH is premised on the idea that markets are made up of people whose judgments are based on a broad set of factors that are not always easily measured and the relative importance of which can vary. As a result, the inter-play between market risk and return is often based on investor perceptions rather than any objective measure of market risk. This misalignment between investor perception and market reality can cause investor expectations and experience to deviate sharply at times, but it can also create opportunities to create value for investors willing to actively manage portfolio risk by actively modulating market exposures. Our current range of investment solutions include:
Active Volatility Management: A futures-based portfolio overlay managed to contain a portfolio’s downside risk or to enhance a portfolio’s risk-adjusted return
Global Alternatives: A risk-controlled, liquid, globally diversified, multi-asset class strategy whose asset allocation decisions are informed by the consensus positioning of hedge funds
Managed Futures: A trend-following strategy similar to those offered by CTAs and managed futures hedge funds
Risk-Efficient Allocation: A dynamic asset allocation strategy that allocates based on momentum and risk regimes, in an effort to manage to a targeted volatility range
Dynamic Allocation: A dynamic asset allocation strategy that uses factors suited to multi-month investment horizons, in an effort to improve on the static “60/40” approach
Tactical U.S. Market: A U.S. equity strategy that seeks to contain the potential magnitude of losses during periods of sustained down-side risk without reducing the upside potential that makes equity investing attractive
¹No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
- The Adaptive Markets Hypothesis: Market Efficiency from an Evolutionary Perspective [PDF]
- Adaptive Markets and the New World Order [PDF]
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We believe that investors are more likely to stick with their plan and achieve better outcomes if their portfolio’s range of risk and corresponding returns stay within their expectations. For this reason, we have changed the traditional investment paradigm by focusing on risk first, helping to create long-term investors in short-term markets.