Columnist throws out alpha baby with beta bathwater
Mar 18th, 2007 | Filed under: Portable Alpha & Alpha/Beta SeparationBloomberg’s Chet Currier is generally in tune with alpha-centric investing. In a column last fall, he quite correctly observed:
The very model of a mutual fund is indeed outmoded, argues a large and growing group of financial researchers and professional money managers who are busy describing, building and proselytizing for a different way of doing things…The alpha-beta community already has been years in the growing. It will be years more before it penetrates, say, the 401(k) retirement-savings market where mutual funds reign now. But a real challenge has been laid down, and it isn’t going away.
But he has thrown out the baby with the bathwater in his latest critique of active management. Earlier this month, Currier referred to alpha as a “mirage”. His thesis:
“…pure alpha may prove an illusory quest. The pursuit of it twists the original purposes of investing, and turns it into a game most players can’t win.”
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