Alpha Generation

Alpha generation describes an Equity Investor’s ability or edge in producing superior equity returns via a unique investment and trading strategy.

The generation of Alpha in a Stock Portfolio refers to the ability of an Equity Portfolio Manager to generate excess returns. Alpha generation could be done by employing an investment strategy which the Manager has developed likely combining both Valuation techniques, quantitative or qualitative, and Trading strategies. The aim is to consistently achieve better returns compared to a reference Equity market, which could be the overall Market or a Sector. The ability to generate Alpha is used to describe a Manager’s edge or ability to beat the Equity markets. Managers seeking to generate Alpha will focus on investing in specific Stocks.