The Incredible Shrinking Alpha
Larry Swedroe Overview:
Alpha, or excess-risk adjusted returns, has become more and more difficult to generate for active managers. This presentation presents the evidence and the reasons why this has been the case and why the trend will continue
Why you should Attend:
Anyone interested in learning the empirical research findings on whether active investing or systematic, replicable, and transparent (defined as passive) investing is the strategy most likely to allow you to achieve your financial goals. Also those interested in learning the reasons why active managers are failing are higher and higher rates.
Areas Covered in the Session:
- The development of asset pricing models reduced the sources of alpha as academics converted what was once alpha into beta (systematic source of returns)
- The pool of victims that active managers can exploit to generate alpha has been shrinking
- The paradox of skill: the level of skill of active managers has increased making it more difficult to generate alpha-as average skill increases it becomes more difficult to outperform by significant margins
- Successful active management contains the seeds of its own destruction due to fund flows and diseconomies of scale
- The amount of assets chasing the shrinking pool of sources of alpha and the shrinking pool of victims to exploit increases the hurdles to generate alpha
- What should you do with the information
Who Will Benefit:
- All Investors and Investment Advisors
Speaker Profile
Larry Swedroe Since joining the firm in 1996, Larry Swedroe has spent his time, talent and energy educating investors on the benefits of evidence-based investing with enthusiasm few can match.
Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” The second edition was published in 2005. He has since authored eight more books: “What Wall Street Doesn’t Want You to Know” (2001), “Rational Investing in Irrational Times” (2002), “The Successful Investor Today” (2003), “Wise Investing Made Simple” (2007), “Wise Investing Made Simpler” (2010), “The Quest for Alpha” (2011), “Think, Act, and Invest Like Warren Buffett” (2012) and Enrich Yourself (2024).
He has also co-authored nine books about investing: “The Only Guide to a Winning Bond Strategy You’ll Ever Need” with Joe Hempen (2006); “The Only Guide to Alternative Investments You’ll Ever Need” with Jared Kizer (2008); “The Only Guide You’ll Ever Need for the Right Financial Plan” with Kevin Grogan and Tiya Lim (2010); “Investment Mistakes Even Smart People Make with RC Balaban (2012); “Reducing the Risk of Black Swans with Kevin Grogan (2014, second edition 2018); “The Incredible Shrinking Alpha” with Andrew Berkin (2015, second edition 2020); “Your Complete Guide to Factor-Based Investing” with Andrew Berkin (2016); “Your Complete Guide to a Successful and Secure Retirement” with Kevin Grogan (2019, second edition 2021); and “Your Essential Guide to Sustainable Investing” with Sam Adams (April 2022)..
Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Morningstar, Wealth Management, The Evidence Based Investor, Financial Advisor, Alpha Architect, and Seeking Alpha.