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The Hierarchy of Alpha

Skeptical scrutiny is the means, in both science and religion, by which deep thoughts can be winnowed from deep nonsense.

—CARL SAGAN

OK, we’ve walked through public markets, hedge funds, and private equity and observed how all these have evolved over time. One common thread through all their histories is that alpha opportunities come and go. Some asset classes still present an opportunity for investors today to continue to access these excess returns, whereas in other markets, the outlook is not quite as good. We’ve also seen how increasingly competitive these asset classes have become as they have grown, with large institutional allocators plowing hundreds of billions, even trillions, of dollars into them. Such capital ...

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