Factors, funds and performance chasingBY INNOVA ASSET MANAGEMENT | VOLUME 10, ISSUE 1In its absolute simplest definition, alpha is just the return of a portfolio over its benchmark: α = portfolio return - benchmark return However, being managers who emphasise 'factor investing', we do not consider this a true reflection of manager outperformance. We will get into why that is later, for now, let's just term the definition set out above as 'naïve alpha'. Given that most advisers would hear the term alpha in relation to managed funds, let's focus on that particular investment product and consider the dangers of just paying attention to, or chasing naïve alpha. Get articles like this delivered to your email - Sign up for the free monthly newsletter More Articles |
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