The Strange Relationship Between Assets and Alpha: Ritholtz Chart

A closer look at hedge funds, assets and Alpha.

Hedge-fund assets recently eclipsed $3 trillion. One of the more popular strategies for hedge funds has been the long/short equity fund.

Charlie Bilello, director of research at Pension Partners and the source of our chart today, writes:

The main selling points and objectives for the long/short strategy are twofold: 1) to outperform the stock market over the course of a market cycle through "alpha" generation or stock picking, and 2) to preserve capital during periods of market stress.

As the chart below shows, this no longer seems to be happening.


The hedge fund industry's ability to generate alpha seems to be inversely proportional to its assets under management.

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