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The Incredible Shrinking Alpha

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Before starting this self study program, please go through the instructional document.


  • Four Themes
    4 mins
  • The First Asset Pricing Model
    7 mins
  • The Profitability/Quality Factor
    15 mins
  • The Pool of Victims is Shrinking
    24 mins
  • The Paradox of Skill
    32 mins

Course Description

In the world of investing, the Holy Grail is finding an investment manager who can reliably, persistently deliver alpha – a feat that seems to be of increasing rarity, as active managers in the aggregate continue to see outflows due to ongoing under performance. Even though Wall Street tries to keep alive the debate about the merits of active versus passive investing, a clear trend has emerged over the last several decades in which investors are slowly but steadily abandoning the hope of out performance that active management offers in favor of the certainty of earning market (not average) returns that passive management provides.The trend has been inexorable as investors become more and more aware of the low and declining odds that active management will outperform.

This CPE webinar, based on Larry’s book, The Incredible Shrinking Alpha,  co-authored with Andrew Berkin, will demonstrate that while it is possible to generate alpha (earn returns above risk-adjusted benchmarks) the odds of doing so are so low that it simply isn’t prudent to try. Larry will explain why the case against active management has been getting persistently stronger over the past 25 years.

The Webinar will cover four main themes: 

  • Academics have been converting what was once alpha into beta. 
  • The supply of victims needed to exploit has been persistently shrinking.
  • The competition has been getting increasingly tougher.
  • The amount of capital chasing a shrinking pool of alpha with fewer victims to exploit has been growing.

Larry will also explain why the trend toward increasing hurdles to the generation of alpha will continue, persistently lowering the odds of generating alpha, making active management a loser’s game.

Learning Objectives

  • To identify how academics have been persistently converting what was a source of alpha into beta reducing the sources of alpha.
  • To recognize how the shrinking pool of active investors is making it more difficult to generate alpha.
  • To recognize that while the absolute level of skill of active managers today is much higher than it was 25 years ago, it’s actually harder to generate alpha as it is the relative level of skill that matters (the paradox of skill).
  • To recognize how the increased supply of capital chasing alpha has negatively impacted returns.

Who Should Attend?

  • CFO/Controller
  • CPA (Industry)
  • CPA - Mid Size Firm
  • CPA - Small Firm
  • Finance Director
  • Finance Pros
  • Senior Accountant
  • VP Finance
  • Young CPA