Better than Alpha: An optimal way to think about alpha

BETTER than Alpha: Three Steps to Capturing Excess Returns in a Changing World, by Christopher M. Schelling, is a valuable resource for investors and practitioners seeking a more thorough understanding of alpha, including what it is, how to identify it and what they should be focusing on instead.

Schelling is head of the US-based investing firm Windmuehle Funds and former director of private equity investing for the Texas Municipal Retirement System.

The author's 3-step framework of behaviour (policy setting and strategic allocations); process (manager selection and tactical allocation); and organisation (types of authority, oversight/attribution, and delegation) provides an optimal way of thinking about alpha. Rather than simply attempting to beat the market, investors should make decisions that heighten the probability of achieving their investment objectives.