Is it really alpha?

Hedge funds often characterise their mission as the pursuit of pure alpha. A growing body of research, however, argues that a significant proportion of observed hedge fund returns are really alternative beta. David Rowe considers the implications for the hedge fund industry and for investors

Few things generate a more emotional response than questioning the essential validity of someone's chosen vocation. When I was taking an MBA in finance in the late 1960s, the capital asset pricing model (CAPM) was a hotly debated topic. Much of the heat in that debate was generated by the theory's implication that security analysis had little to offer investors unless it was informed by non-public (that is, inside) information. As an occasional look at CNBC or any other financial news network