It's all in the timing

The use of beta in absolute return investment products and hedge funds is controversial. At the very least, critics argue, investors should not pay alpha fees for beta products. Moreover, a lack of clarity about the use of alpha and beta can weaken the integrity of the asset allocation process and assumed levels of diversification. Beta refers to the return provided by the market. An index-tracking product should provide pure beta. Alpha refers to the incremental return from active management. With a traditional product, the alpha is the total return minus the benchmark return. Alpha has ...