Definition
Alpha Generation
The process of producing investment returns that exceed a benchmark or market average.
Alpha represents the excess return an investment generates relative to its benchmark, adjusted for risk. Generating alpha consistently is the primary objective of active investment management. Sources of alpha include superior information (primary research), better analysis (fundamental insights), behavioral advantages (patience, contrarianism), or structural edges (market access, speed). As markets have become more efficient, traditional sources of alpha have diminished, making primary research and expert networks increasingly valuable for developing differentiated investment insights.