The ‘excess return’ of a fund or security relative to a predetermined benchmark. For an absolute return fund the benchmark would normally be a short-term money market index. In general, realised ‘alpha’ is considered as a measure of a fund manager’s skill.
- Alpha risk
The probability that an ‘alpha provider’ may not produce returns above the benchmark.
- Alpha provider
A manager who claims to be able to deliver returns above a pre-specified benchmark through active management; also known as an ‘alpha generator’.