How Important is “Alpha Generation” Really to Hedge Fund Investors?

In early 2019, J.P. Morgan surveyed hedge fund investors to identify their reasons for investing in this space – 88% of respondents cited “alpha generation” as one of the top three motivations. If this is the case for such a high number of investors, it’s important to look at the strategies being pursued in the quest for alpha to see what’s working and what isn’t. We crunched the numbers and found that it’s a good time for a gut check.

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PivotalRating System

The PivotalRating System measures and analyzes a number of key characteristics of sustainable hedge fund manager performance, including quality of alpha, drawdown management and relative performance analysis. These three metrics are quantified, rated, and then aggregated to produce a dynamic overall score between 0 and 100. Data is collected with monthly frequency, with an overage of 100 data points per fund covered. 

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ResearchAbigail Corcoran
A Junk Rally in Hedge Funds?

What if we told you that one risk factor can explain most of the significant dispersion in returns in the first quarter of 2019? That factor is the Bloomberg US Pure Leverage Portfolio ("Leverage"), a measurement that tracks U.S. companies that are highly indebted, or leveraged. Put another way, it is a measure of quality.

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InsightAbigail Corcoran