Alpha ain't the only game in hedge fund land

Traditionally, hedge fund "activity" or "success" has been measured by alpha. Alpha, loosely speaking, is what cannot be "explained" by correlations in fund returns to benchmarks or factors. If a manager  invests all capital in an S&P 500 ETF, for example, the returns of the S&P 500 should explain all of the fund's returns; the alpha should be zero. That manager might have great returns (because the index gained, say, 30% that year) but he would be considered "unskilled" or even downright bad because his alpha is non-existent. 

Now, that's just not fair. 

What if the manager made a bet that the S&P 500 would outperform all other strategies that year? And what if he was right? Is he still bad? Inactive? Is he skilled? Did he just get lucky that one time? 

What if we could identify, ex ante, those managers that were really good at making smart bets over time? Not just lucky. Not just once. But often. Guess what? We can. The full paper may be found here