How Do Hedge Funds Become Better Forecasters?

Securities investing is a challenging game to master. Part financial modeling, part domain expertise, part vision; we are constantly reminded – and humbled – by how demanding this vocation can be.

What makes investing so hard is the seeming omniscience of your foe – the market – a living and breathing reflection of all financial speculators. Its long term track record and increasingly cheap availability is the hurdle for success. The most storied investors of all-time, from Warren Buffet to Joel Greenblatt, and from Julian Robertson to David Einhorn have been carefully studied in hopes of emulating their brilliant track record.

We believe that one of the few untapped frontiers in alpha generation is measuring and putting process around forecasting. In this collaborative piece between Novus and Alpha Theory, we’ll explore ways that fund managers can generate additional alpha by becoming more process-oriented securities forecasters.