Investing is Moving Beyond Alpha & Beta Says Impact’s Powell
By Brendan Coffey
The dominance of passive investing and the decline of outsized performance by active managers means competition in the investing world is evolving beyond alpha (market outperformance) and beta (matching the market), says Ethan Powell, the founder of index fund provider Impact Shares and a non-executive director at alternative asset manager Highland Funds.
Many of the statistics are well-known. Depending on your time frame, two-thirds to nine out of ten active managers fail to beat their benchmarks. That has resulted in tremendous investor asset flows to passive investing – funds that buy everything a benchmark consists of (like the S&P 500 index). About $1 trillion has flowed out of actively managed funds into passive funds since 2007 – about the same amount of money that went into active funds the 18 years before that, according to research by AllianceBernstein. That’s a huge culture shift.
Photo courtesy of GotCredit.
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