Alpha Capture Systems: Past, Present, and Future Directions

Abstract

Alpha Capture Systems (ACS) describe a set of commercial and private systems that track investment recommendations and their subsequent performance to create an alpha generating portfolio. This paper presents an overview of the ACS evolution from the first sell-side to the more recent buy-side systems, from capturing brokers ideas to mutual funds and even hedge funds positions. We discuss the key features of the most recent ACS and flag their weaknesses. We also suggest various improvements that we expect to see in future ACS and which, based on our experience, should lead to enhancing their performance significantly.

Keywords: Alpha, active management, hedge funds