January, 2009

By: Morton N. Lane, President

“Alpha” is the holy grail of the conservative investor. Alpha expresses that part of an investment’s return that is not related to general market returns. Thus an investment that does not fall when the Dow falls (and vice versa) is said to have high alpha. It would be a valuable diversifying asset to reduce portfolio volatility. Regrettably, such investments (or asset classes) are hard to find. Insurance Linked Securities (ILS) are, however, thought to be one such class. This chapter surveys the ILS market, its history and the claim that it provides genuine alpha.

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