As a portfolio manager, I frequently think about what makes my clients happy †Alpha, Beta or other feted or feared letters of the Parthenon. Perhaps it would be useful to focus on the various investment return properties that make Investors happy in order to understand what ‘Alpha’ is from their perspective?

In my experience, the following the three factors consistently rank highest as Investor pleasers: 1) expectation of positive performance above their benchmark; 2) stability of the return distribution, especially in the tails; and 3) the diversifying properties or lack of correlation of the Manager’s returns versus other portfolio holdings.

Institutional investors seek out these qualities. Maybe investment managers ought to focus on delivering these tangibles, rather than questing for ‘ubiquitous Alpha’?