Alpha

Alpha is the excess return of a mutual fund or portfolio relative to the return of its benchmark index, after adjusting for the risk taken.

A positive alpha means the fund has outperformed the benchmark; a negative alpha means it has underperformed. For example, if a flexi-cap fund returns 16% and its benchmark Nifty 500 returns 14%, the fund has generated an alpha of 2%. Skilled fund managers aim for consistent positive alpha over rolling 3-year and 5-year periods.