MIT: In Search of Persistent Alpha


My “In Search of Persistent Alpha” panel is up — its a great group (see below)

Here are the questions I have tee’d up:

1. It has been a rough decade for those who pursue Alpha: The rise of indexing has been a challenge, inflows have gone to passive giants such as Blackrock and Vanguard (BR + VG = 57% of 2018 global fund flows) > $11 Trillion own 10% of every U.S. stock (~overseas).

What is behind Alpha’s fall from grace?
What must active management do to thrive in the current environment?

2. Where Has All the Alpha Gone? This has been the key underlying question.
Is this a case as Michael J. Mauboussin call “the Paradox of Skill”? Is this a case of too many talented people chasing finite alpha or has something fundamentally changed in the markets?

3. Have we made investing too complex?
We have lived through 2 World wars, an industrial, technology and information revolutions, etc, and yet, a simple proxy for market equilibrium phenomenon such a P/E beats the market.

4. Net of costs, fees, and taxes, the odds against outperforming versus a simple 60/40 portfolio are long. How much of the pursuit alpha is at the expense of Beta?  What motivates this ?

5. How do you invest your own money?
(I understand that this is an Unfair question, given compliance etc. — how do you advise your mom to invest her money.

6. CFA Institute announced the winners of the 2018 Graham and Dodd Awards of Excellence Top Award goes to “Buffett’s Alpha” (Chris Doheny, AQR Capital Management colleagues) Buffett’s returns appear to be neither luck nor magic but, rather, a reward for leveraging cheap, safe, high-quality stocks.


Alpha Panel

Lila Hunnewell – Chief Investment Officer, Boston University Endowment
Jordan Alexiev, CFA – Head of Dynamic Asset Allocation Research, Fidelity Investments
Chris Doheny, CFA – Managing Director, AQR Capital Management
Daniel Adamson – Managing Director, Wafra


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