The construction of a portfolio using active returns (alpha) as the primary driver of the construction process, instead of asset class betas. More specifically, this involves using absolute-return assets at a portfolio’s core and encircling the core with actively managed classes (outer rings). Expected volatility increases as we move from the core to outer rings or layers, and so on. This method of construction may appeal to investors who believe that some asset classes are efficient and should be indexed (portable alpha concept), but only most of the time and not always, and want to avoid the use of leverage (gearing) in portfolio construction.

Alpha core is an alternative methodology to portable alpha as it does not use notional leverage, contrary to portable alpha which prominently uses it. Alpha core consider periods of efficiency and inefficiency in the asset class which is passively replicated in portable alpha.