Alpha & Beta
✓ Last verified 14 Sep 2026
The short version
Beta measures how much a fund moves relative to its benchmark (1.0 means it moves in line with the market); alpha measures the extra return a fund manager generated beyond what beta alone would predict.
A fund with a beta of 1.2 tends to move about 20% more sharply than its benchmark index in both directions - higher beta means higher sensitivity to market swings, not necessarily higher risk of permanent loss. Alpha is the return a fund delivered beyond what its beta-adjusted exposure to the market would predict - a genuinely positive alpha over a long period is a real (if hard to sustain) sign of manager skill, whereas a fund's raw returns alone don't distinguish between skill and simply taking on more market risk (higher beta) to get there.
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