Riding The Vehicle Of Opportunity To Alpha

Take a look at this equation:


In asset trading, every security has a rate of return; the Jensen’s Measurement is an applied equation to determine the excess return of a security AKA alpha.  Generating alpha is about diligent research, industry knowledge and professional intuition to produce numbers above and beyond the projected benchmarks your safe, low-risk-chasing competitors are after. While generating alpha can be risky, the returns are greater, and so are the bragging rights.

Now hold that thought.

A couple of months ago, I wrote a post welcoming the SEC to the 21st century, with the overturn of an 80 year ban on advertising and marketing small businesses and private funds to the public. In July of this year, the JOBS Act (Jumpstart Our Business Startup Act), which was intertwined with this 80-year ban, was ratified by a bipartisan, US congressional vote making it legal for small businesses and private funds to interact with and generate revenue publicly, over a variety of social platforms.

But, alas, 80 years is a long time. Being loud, colorful, design-forward and against the grain in approach to marketing hasn’t quite caught on, especially within the financial sector where modesty, tepidness, and tradition still seem to guide outreach strategies.

So what does generating alpha and the JOBS Act have in common?  Well, quite a bit, actually. In fact, one is a vehicle for the other.

Kris Jenner, a longtime health care investor with Rockspring Capital recently noted at the annual Generating Alpha Conference in NYC, that alpha is available to those willing to be a little different. “Ultimately, alpha has to be reflected in generating differentiated and unique insights that are not shared or largely appreciated by the consensus view,” he said, and with regards to our industry, that means that antithetical approaches to what is ‘the norm’ from a smaller niche of marketers, will rein champions.

The ratification of the JOBS Act created a new, exciting playing field for marketing small businesses and private funds, and the trepidation companies hold in taking advantage of this opportunity makes alpha for those willing to stand out, that much more available.

Sure, you can go and market your business with someone else, elsewhere. You'll look the same, say the same things, and take all the same strategic steps as your competitors. You’ll continue on a ‘market neutral path’ and base your ROI on a rather passive, average benchmark. But let's be honest, standing out and taking a ride on the newly revised JOBS Act while generating alpha is just so much more fun. 

By Carlin Sewell