porting alpha another, position, actually, long

Palantir

A manager finds a capable active manager in Japanese markets (TOPIX). How is it that shorting a futures position in TOPIX and going long in SP 500 futures equates to a portfolio that is SP 500 Index plus alpha associated with the Japanese portfolio?

Wouldnt the manager have to actually invest in the Japanese Managers portfolio? Is there another trade in this besides only shorting the futures positions in TOPIX and going long SP 500 Index Futures?

Can someone explain this to me like I am in 4th grade?

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Edited 1 time(s). Last edit at Thursday, May 12, 2011 at 11:57AM by SkipE99.