This is the Master Key

"For any alpha manager, I think what we've learned in 2008 is, as commonly said, "the name of the game is staying in the game." Simply, this means that the idea of preserving capital, *not* generating alpha, on down markets is what is important. That's what passive investors pay active managers to do. In fact, one may argue that might be where most of the value in alpha management.

As a derivative of this psychology, a shrewd and experienced alpha manager, then, is observed by the metrics of how well he takes the pain. I have not been in finance as long as my other colleagues have, but one experienced trader, who entered Wall Street in the 70s aptly said that we just price in the swings on either direction. it's the long term average we're most concerned about. We take our buffer on the way up to prepare for the inevitable down swings. Once we expect these tracking errors, it's less of an emotional toll." -Goldman Sachs Trader 3/2010