Alpha, once beatified, now “beta-fied”
Oct 29th, 2007 | Filed under: Alternative Beta & Hedge Fund ReplicationIt was only a couple of years ago that David Hsieh made an off-the-cuff remark that many took as a questioning of the long-term viability of the hedge fund industry (see related posting). He estimated that around $30 billion of alpha was available to hedge fund managers. This immediately started a round of navel-gazing in the industry the led to a number of competing estimates of the total supply of alpha in the world (such as this one by Lars Jaeger). Was alpha going to run out? Would the party be over soon? Was there a “peak alpha” theory? These became the dominant questions of 2006.
Now it appears those concerns were so “last year“.
Both Hsieh and Jaeger were among a dozen experts to address a packed audience in New York today at the inaugural US edition of Terrapinn’s “Alternative Beta & Hedge Fund Replication” conference. This time aorund, Alpha Male took a turn at being master of ceremonies. (see related postings on sister events in London and Geneva earlier this year).
Instead of worrying about the finite size of the world’s alpha supply, Hsieh, Jaeger et al argued that hedge funds would likely survive on a diet of “alternative beta” even if their traditional food source (alpha-generating market inefficiencies) ran out.
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