Risk measures
What is alpha?
Alpha is the return a fund earned above what its benchmark and its level of market risk would suggest. It is a measure of the manager's contribution.
How it works
Positive alpha means the fund did better than expected for the risk it took; negative alpha, worse. Factsheets calculate it in different ways, so compare alphas only from the same source.
Example
If a fund's beta suggests it should have returned 11% when it actually returned 13%, its alpha is about 2 percentage points.
Keep in mind
- Past alpha does not guarantee future alpha.
- Costs reduce alpha, which is one reason many funds trail their index.
Questions people ask
Is alpha the same as beating the benchmark?
Not exactly. Alpha also adjusts for how much market risk the fund took.
Do index funds have alpha?
They aim for none: their goal is to match the index.
Related terms
General information for education, not investment advice or a recommendation of any scheme. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future. Last reviewed 25 October 2026.