Alpha Capture is the name given to the method by which hedge funds extract value from sell-side research and broker trade ideas by tracking and measuring their performance both in absolute terms and relative to their peers.

It was first developed by hedge fund Marshall Wace in London and has subsequently been used by numerous other well-known hedge funds and third-party platform providers. As a sales-trader to Marshall Wace in 2003 shortly after its introduction, and as someone who welcomes transparency, accountability and meritocracy in the world of trading and markets, it was something I thrived at and have carried elements of it forward in my work to this day.

In his book 'Absolute Returns', Alexander Ineichen quotes Ian Wace:

"This business has nothing to do with positive compounding; it has to do with avoiding negative compounding... The P&L is the only moderator of hubris. You are not given money to lose it." *

This concept of avoiding negative compounding is something that has always resonated with me.

I feel it is commensurate with the basic tenets of trend following; letting winners run, cutting losses, not attempting to pick tops or bottoms, and in the case of stocks, not trying to beat the market through relative returns, but rather trying to capture most of an uptrend, avoid most of a downtrend, and in doing so coming out ahead of the market.

Ineichen echoes this in his footnote:

* "needless to say, neither are long-only managers hired to lose money. However, the absolute return focus puts more weight on preserving wealth in difficult market conditions... Managing volatility and avoiding losses subsequently results in superior long-term absolute as well as risk-adjusted performance."

That's what Alpha Capture means to me and why I chose it as the name for my blog.