Special to AllAboutAlpha.com by: Jane Li, CFA, CAIA, Manager
Investment Management & Research Team, FundQuest

With the explosion of hunters searching for the same scarce alpha and the proliferation of high-frequency trading, is asset management still all about alpha? Yes, says Jane Li, CAIA, of FundQuest, a division of BNP Paribas. Her research of over 10,000 mutual funds (both alive and dead) collectively managing $4 trillion shows that it depends on which category of fund you’re talking about.

Many argue that more efficient financial markets permanently reduce the potential for managers to produce bona fide alpha. For example, the author of “Illegal Alpha,” published on AllAboutAlpha.com in November suggested that “…nowadays talk of alpha generation and alpha-beta separation still permeates, though the search for it – and expectations of finding it – has greatly diminished.”

I disagree. In fact, following the significant out-performance of many active managers over their passive peers in 2009, it seems logical that investors will rekindle their passion for searching for alpha.

Click here to continue.