Investors at risk of being misled as alpha strategies gain in popularity
As demand for alpha strategies intensifies, market participants warn that the use, or rather misuse, of the term alpha could provide investors with a false sense of security about underlying attributes and risks. Magda Ali report
Since the onset of financial crisis in 2007, investors have sought ways to mitigate tail risks in an attempt to preserve long-term investment objectives. Traditionally, alpha has been explained as the excess return of a strategy after taking into account market risk. Alpha strategies are expected to deliver index-beating returns on the basis that they are active whereas indexes are passive.
One of the supposed benefits of alpha strategies is the risk-adjusted excess returns that the strategies
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