Abstract
The asset management industry has become increasingly polarized as asset owners seek high alpha products at one end of the spectrum for excess returns while also pushing assets in the direction of beta drivers to capture efficiently systematic risk premiums. This polarization has led asset managers to develop products that capture the tails of the distribution within the asset management industry. At one end of the spectrum we have Process Drivers that seek efficient ways to capture financial market risk premiums. At the other end of the scale we find Product Innovators who take more risk, are not driven by benchmarks, and seek new ways to generate excess returns. Caught in the middle are traditional asset managers that generate small bits of alpha or expensive beta. This article explores the nature of alpha, how to find it, and how asset management firms try to produce it. TOPICS:Real assets/alternative investments/private equity, risk management, portfolio construction
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