The return of the active investor
Despite the zero-alpha assumption, we have good reasons to continue exploring and executing our strategy
An investment firm’s competitive advantage is a sustained ability to deliver value that rivals cannot readily reproduce. It may rest on research knowledge, team organization, relationships, technology or scarce data. But a collective arms race raises the standard without giving everyone a lasting relative advantage. Under efficient-market assumptions, persistent informational alpha should be competed away, and in practice, many managers also fail to outperform after costs. The verdict follows: no competitive advantage, no alpha.
Despite the zero-alpha assumption, we have good reasons to continue exploring and executing our strategy
