Alpha
Private Credit glossary · Fund Structures, Returns & Economics
Definition
Investment return attributable to manager skill, not systematic risk exposure.
Alpha in plain English
Alpha is the part of an investment return that comes from a manager being genuinely GOOD — skillful stock-picking or deal-making — rather than just riding the overall market up. Picture two surfers: if the whole ocean rises with the tide, everyone goes up (that's the market, not skill), but the surfer who catches better waves than everyone else in the same water is showing alpha. Investors chase alpha because it's the only return worth paying a manager extra for — anyone can get the tide.
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