Alpha and beta separation. Reading 27 index, capable, position, japanese, long

amqata

On page 238 of the cfa book, using futures instead of long/short to port alpha, the books says that one has to short futures on the manager of the japanese index and take a long position on the s and p. this sounds a bit counter intuitive. Wouldnt we want to be long the japanese managers alpha since it says that the manager is a capable one? Or am i assuming too much with the word “capable”

stockjaguar

he wants S&P 500 exposure. So he would be long s&p 500 futures and would then short the Topix Index futures for the active return. and he is explicitly forbidden from investing long/short.
the short futures position would be considered a hedge and not explicity seen as a violation of the short constraint.

svgleeson

This makes more sense. Thank you all for the replies.

Matori

This makes more sense. Thank you all for the replies.