alpha

“You find alpha most of the time where there are dislocations, where there are capital shortages in the world. You don't find alpha all the time on the corner of Fifth Avenue and 47th. It just doesn't sit there all the time.”

“For the kinds of skill we're looking for, you need talent, and talent is expensive, so the idea that you can generate high alpha for low fees, I think, is a complete misnomer. Very hard to do... But when you find true talent, you gotta pay them, and I think yo…”

“I think there's a bit of a false dichotomy that people draw between what's more important, manager selection or asset allocation. So let me first say, if you're selecting managers who can't outperform. That's a problem. Then it's a problem. You should just ind…”

“Really all that matters in markets is relative skill. That if you've got, you know, 10 PhDs in a room, maybe 3040 years ago, that meant you were going to earn enormous alpha. But now everyone has those 10 PhDs, and they're fighting against each other. It's a r…”

“I think alpha's never going to be as high on a repeatable basis as it probably was in 2000 or one, but we still believe in active management very much.”

“A sector like real estate is sort of a boring sector, right? There's not that many people who are looking security by security and saying, you know, here's the characteristics of REIT A versus REIT B, right? It's not a particularly exciting area, but it's one …”

“So one of the ways to quantify that as we measure the standard deviation of excess returns, the standard deviation of alpha, right? So you imagine alpha plotted as a bell shaped distribution, which is roughly not a horrible way to look at it. And that bell has…”

“Increasingly, particularly big investors recognize that the money that they're going to make is not necessarily by harvesting alpha and beating the other guy. It's by having economic value of those companies actually grow and generate revenues and innovation a…”

“It dwarfed what we expected by a factor of five. And so, it's really hard to create a lot of active alpha when there's that much money in the space, and when a lot of the similar approaches, we're now almost on third generation, meaning, like, some of the earl…”

“I do think that edge goes away, and people figure things out, and money piles into strategies, and when capital flows in anywhere, it wrecks. Not just future returns, but the risks go up as well. So getting dinged twice, you're getting a lower expected return,…”

“When you look at it, the cost has eaten up almost all of the alpha inactive strategies.”

“So when we think at the very top, we're thinking about illiquid assets, 10 to 12 year lockups, and that's a big, thick icing on the top. There's lots of alpha there. Lots of manager value added because it's an illiquid market. It's idiosyncratic. It takes spec…”

“What it was found was that the funds that delivered the most Alpha were actually funds with three portfolio managers and better than single managers, and by the way, better than two and four.”

“It's actually far easier to shape down tracking error than it is to find new alpha. I could run a much lower tracking error process with not that much additional research. I can't just go find new alpha.”

“So if you buy in value today, you, on average, earn a little bit of alpha for a really long time. Most of it's early on, but you continue to earn marginal monthly alpha for up to 10 years.”

“So, so I think the S of the ESG and the human element, let's call it, that we're picking up, is probably one of the most undiscovered sources of alpha. And when we do our factor analysis, one of the greatest contributors to the outperformance that we see.”

“There's not much alpha you can add managing a treasury book. So we don't really bother doing too much of that, so we have an index treasury book.”

“In general, across the industry, for long periods of time, last 10 years, there is no alpha in the short positions.”

“And back at that time, Alpha was obviously easier to earn, fewer competitors, much smaller amounts of assets. You know, hedge funds in the eighties and early nineties were, some were large, some might have been multiple billions, but most were less than a bill…”

“Our logic, again, is that if we are doing things that other people are unwilling to do or unable to do, unwilling because it's tedious and boring, unable because of capacity issues, and we can do that, that should be where alpha is. I mean, that should be what…”

“One of the things we don't expect our long, short managers to do is to generate alpha Against our long equity benchmark in a rising market. That would mean that they're pushing it too hard on the long side.”

“What we have shown is that it's very clear that the standard deviation of alpha is Is greatest following periods of high dispersion. So that's saying that high dispersion allows, the tide goes out, you know, who's wearing a swimsuit. High dispersion, that allo…”

“My biggest investment pet peeve is probably an over-reliance on trading algorithms and back tests that lack a foundation in underlying theory. Probably comes back to my academic roots. But while I believe big data is absolutely part of the answer, and there's …”

“If you begin to see that the individual not only Consistently delivers alpha, but their success ratio is consistently between 50 and 60%, so they're consistently getting it more right than wrong. There's a skew in there, and then you can look at how that works…”

“The fee for beta today is nothing, right? I mean, you can go and buy a passive index of whatever beta you want for nothing. The alpha is what's valuable, and people are happy to pay for that and should pay for that.”

“I think the proportion of alpha that clients are happy to leave with a manager Has not really changed over years. You know, you can debate, and maybe it's something to do with the quality of the returns, some number between 25 and 30% of alpha that clients are…”

“Private equity for sure. You can't separate the alpha from the beta. That's just one package.”

“I've always said, and I still believe that alpha is scarce, and it's transient. It doesn't stick around for very long because it gets competed away. And so you always have to skate to where the puck is going, knowing that it's not going to stay long in any one…”

“I think the journal is the most underrated source of context and alpha in like any asset class that you're investing in. Everyone assumes it's information that's already out there, so you're not going to get much value from it, and the reality is most people, …”

“Our mission on the short side is to deliver five to 800 basis points of alpha consistently.”

“I think where a lot of the real alpha is going to be going forward. It's bespoke investments where you functionally create the investment, whether it's in the commercial real estate or resi or a European asset finance. The term loan to an aircraft producer. Th…”

“And in alpha space, average managers lose money. You don't make alpha unless you are exceptionally good. And people think as long as you're reasonable, you'll do all right. Good isn't good enough. You've got to be great.”

“You have to have a repeatable process. It doesn't happen that one day you're a growth investor and the next day you're a value investor, that you're a bit of macro and then you're a bit of bottom up and you're, I don't believe in that.”

“We spent an enormous amount of time in conference rooms doing asset allocation meetings, trying to predict where did we think there was going to be alpha next year? Was it going to be an event year where there's going to be more alpha in stock picking in Europ…”

“If hubris is the biggest enemy of alpha, the second biggest enemy is taking too much capital into a strategy.”

“What I experienced in investing in funds is alpha maintains much more than people expect for a certain period of time in a strategy, certain size growth in a strategy. But once it starts to drift off, it collapses and goes negative. And once you fall off the c…”

“The thing that has always attracted me to the seed stage has been that there's no beta in going from zero to one. That's all alpha.”

“The most alpha is usually found in the things that are annoying and hardest to do. Meaning if you have to set up a new wallet, if you got to get on some new exchange, if you got to learn some new protocol.”

“Mobuson did a study where he showed that when large caps outperform, alpha's harder to find because they crowd everything out.”

“Sometimes the right size is small, and you have to be happy with that. You can't grow beyond where that alpha component is going to be reduced. There are plenty of people who are great at running a billion, but then they end up running five billion, and they s…”

“We do not believe that we exist to generate alpha over short measurement periods like one, three, and five. Our goal is to outperform over a full market cycle”

“I do know we are decreasing alpha in our models, just in terms of what we expected historically.”

“We're always trying to make sure we're only paying performance fees on the alpha, not the beta.”

“You should pay huge attention to any source of alpha. It's probably beta.”

“And then if you go all the way to the factor neutral world, it seems that three percent alpha works for everybody. That's fine. We're shooting for 20% alpha.”

“When we break down the returns over the life of the fund, 18 years now, we've added about two and a half percent per annum, which we think is pretty good, and it's actually split, interestingly, only about a half a percent to diversification in the traditional…”

“Diversification cuts both ways. It eliminates systemic risk, but it also diversifies away your alpha if it's too diversified.”

“I tend to think those shops probably can't grow by another factor of five. There's just a limit to alpha. There are limits how many great traders that are out there.”

“Alpha is going to get harder and harder and harder. It already has gotten harder. AI is going to actually speed up that as well. And so as investors thinking about beta is going to become more and more important over time and having the best beta you possibly …”

“And so I think the most interesting alpha today comes from a lack of capital. And that lack of capital can either be because it's unfavored or And that goes to being contrarian. Something's cheap because people hate it. It can be a lack of capital because of a…”

“Strategies that do three things over time really outperform. And those three things are invest with high active share. So you don't, by definition, look like an index. Second, concentrate in your best ideas in recognition of the fact that actually markets are …”

“The truth is, is that most strategies that can generate alpha don't scale and aren't even necessarily replicable.”

“There's some neurodiversity throughout our industry, and we're trying to write a paper that says this is how you can see the same data set differently. That's the pathway to alpha.”