The Alpha Games: Technology Funds

And the winners are…

April 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • US tech funds underperformed their benchmark indices by 4% between 2018 and 2022
  • The factor contributions were marginal
  • This resulted in a median alpha of -4% over the 5-year period


Every day, fortunes are won and lost on the stock market. However, investing in stocks is not a zero-sum game as wealth is created from the profits earned and distributed by public companies. In contrast, searching for alpha is a zero-sum game as for every investor that outperforms the stock market, there is one that underperforms it.

The search for alpha can be considered a fool’s journey as there is plenty of research that shows that few active managers create alpha, and even fewer achieve it consistently. Yet, still most investors believe in alpha and continue the pursuit of it.

In this article series, we evaluate the alpha generation of mutual funds and ETFs, starting with technology-focused funds. Let the games begin…


We focus on mutual funds and ETFs trading in the US that focus on technology stocks. We exclude any funds with less than five years of performance history, which results in a universe of 94 funds for our analysis.

It is worth mentioning that we do not include any funds that have been liquidated, which implies that this analysis suffers from survivorship bias. Given that the poorly-performing funds are liquidated, this means that the median return of these funds will be overstated.

We use Finominal’s Alpha Analyzer to automatically select the benchmark index that has the most similar sector exposure for each fund. In almost all cases, this results in the MSCI Information Technology Index.

However, there are a few exceptions where the name and classification of the fund are misleading. For example, our benchmark for the Kinetics Internet Fund (KINAX) is an energy index, which is explained by the fund’s largest holding being the Texas Pacific Land Corporation (TPL), an energy company, with a 33% weight. The fund uses the S&P 500 and Nasdaq as benchmark indices on its factsheet, which highlights the value of an automated and unbias