In October 2025, a revealing quote surfaced from Ken Griffin: General AI, he said, “fails to help hedge funds produce alpha.” That’s not the kind of statement you see in the press often. A prominent financial visionary has openly questioned the fundamental promise of the newest trend in finance. However, upon closer examination, this statement also serves as a cautionary tale for investors who are still chasing alpha.
Because here’s what Griffin’s line signals: Markets may already be pricing in too much expectation regarding disruption. Easy gains (the ones you can capture via momentum or thematic exposure) are growing more contested. When the narrative drives the trade, profit margins decrease. That’s where special situations, spinoffs, breakups, and carve-outs reassert their relevance. Unlike thematic bets, the value of special situations is rooted in structural change and inefficiency, rather than consensus momentum. At The Edge, we believe the future of alpha lies less in hype and more in the gaps between story and structure.
Why Hedge Funds Overlook Areas Where Alpha Still Exists
Generative AI has its place. It can accelerate research, clean up noisy data, and help analysts move faster through the monotony of information gathering. But that’s operational efficiency, not alpha. The mistake many funds make is that they assume that speed and automation will somehow produce differentiated returns. They don’t. What we’re seeing instead is the mass commoditization of processes. Everyone is building off similar models, scraping the same filings, and summarizing the same earnings calls. The result? Convergent thinking disguised as innovation. GenAI doesn’t interpret regime shifts. It doesn’t recognize when a CEO is under pressure or when a spinoff’s incentives have quietly changed. It can’t detect misalignment between what management says and what they do. These are behavioral signals, not data points. In many ways, GenAI is becoming a consensus amplifier. It reflects the market’s assumptions faster but rarely challenges them. And that’s where it fails to deliver alpha. Excess return has never been about understanding what the market already knows. It’s about spotting what it hasn’t priced. Insight comes from dislocation, from asymmetry, from context. AI gives you summaries. It doesn’t give you structure. And when the edge lies in nuance, speed without interpretation is just noise.
Where Alpha Still Exists: When Structure Beats Story
If If AI is becoming the new baseline, then real alpha exists in the areas that the market still overlooks.at edge exists inside structural inefficiencies, not in faster processing of the same information. Spinoffs, breakups, and carve-outs are prime examples. These events are not born from optimism. They are born from pressure. A parent company is forced to act, whether due to regulatory constraints, activist demands, or balance sheet repair. That urgency creates disruption. It triggers index exclusions, mandated selling, and temporary confusion. What follows is not efficient repricing but a vacuum. New companies come to market with no analyst coverage, no models, and very little institutional understanding. Investors sit back, unsure of what they are even looking at.
That is where opportunity lives. These situations create dislocations that are mechanical, not narrative-driven. There is no story to chase because the story has not been written yet. You are buying misunderstood change before the structure becomes obvious. Management incentives often shift overnight. Operational clarity improves. Once the market catches up, the discount has already narrowed. These setups are not about sentiment. They are about sequence. While the world focuses on headline themes and macro noise, spinoffs reward those who understand alignment, timing, and quiet dislocation. This is where alpha still lives, patiently compounding in the background.
How Spinoffs Prove Where Alpha Still Exists
At The Edge, we have spent more than two decades studying spinoffs across industries, geographies, and cycles. What we’ve learned is that their outperformance is not random or dependent on sentiment. It is repeatable because the same structural forces continue to create the same inefficiencies. When a parent company sheds a division, the initial move is not driven by investor enthusiasm. It is driven by necessity. A regulatory push, balance sheet stress, or activist involvement forces the decision. That urgency leads to selling, not buying. Index funds drop the spin because they no longer fit their mandate. Institutional holders offload it because it is too small or unfamiliar. Liquidity providers exist. This flood of mechanical selling happens before the market ever stops to evaluate the business on its own terms.
What follows is silence. Most spinoffs arrive in the public market without coverage. There are no earnings models, no consensus targets, and no sell-side initiation notes. The absence of a framework leaves institutional investors in a temporary void. This scenario is when informed capital has an advantage. With no crowd, no narrative, and no anchor, early analysis matters more than ever.
Inside the business, the shift is equally powerful. The same management that once operated under a conglomerate now has full accountability. The success of the newly independent company, not the broader parent, determines their compensation. That alignment changes how decisions are made. Strategy sharpens. Capital is allocated more efficiently. Operations become visible.
Spinoffs offer line-of-sight results. Financials are cleaner. Growth drivers are easier to see. And once the market catches up, the mispricing closes quickly. But by then, the advantage has already shifted to those who understood the structure from the start.
A Real-Time Example Of Where Alpha Still Exists
A live example of how structural alpha plays out is our position in Western Digital and its subsequent spinoff, SanDisk. We entered WDC pre-spin on January 3, 2025, at $64.07, anticipating the breakup under pressure from Elliott Management and other shareholders. The move was not a creative capital allocation decision. It was a forced structural correction after years of strategic inefficiency. That’s what made it investable.
The market reacted predictably. Passive flows rebalanced. Index funds adjusted. Analysts were slow to initiate coverage. But we understood the setup early. We held SanDisk post-spin, and to date, that position has returned 115 percent. During the same period, the S&P 500 returned just 12 percent. That’s 103 percent of clean outperformance, not driven by hype, but by structural change the market hadn’t priced.
We doubled down on April 8, issuing another Buy call on WDC in our “8 Fallen Breakups” report at $31.55. That trade has now delivered 233 percent. The thesis wasn’t complicated. Capital was misallocated, structure was broken, and the separation created visibility and accountability. Alpha followed.
These stories are common. They are just rarely understood in time. When structure shifts before the narrative forms, that’s where you want to be.
Our Process For Finding Where Alpha Still Exists
At The Edge, we don’t follow narratives. We focus on structure. Our process starts by identifying dislocation situations where the company is pressured to act, not choosing to. That includes regulatory mandates, balance sheet constraints, board friction, or activist involvement. When those catalysts converge, we take notice. We monitor potential spinoffs well in advance of their announcement. We study parent structures, carve-out financials, and management signals. We model the businesses independently and map where incentives are likely to shift post-separation.
We do not wait for consensus or coverage. By the time the sell side initiates or index funds rebalance, the opportunity has already moved. Our position size is built around asymmetry, not certainty. We’re not trying to be right on every trade; we’re trying to be early when the market is still uncertain. That’s where the edge lies. When structure changes quietly, and no one is paying attention, disciplined preparation creates outperformance. This is not a one-off strategy. It’s a repeatable framework. And we’ve seen it work across geographies, sectors, and cycles, because inefficiency isn’t a theme. It’s a constant.
Why Fund Managers Need To Know Where Alpha Still Exists
When thematic trades dominate the market, portfolios begin to blur. Everyone eventually adopts the same names: AI, cloud, semis, and other common names. Correlation increases, conviction dilutes, and true differentiation disappears. In that environment, outperforming becomes less about the next idea and more about the next structure the market has overlooked.
Spinoffs offer something most trades can’t: uncorrelated alpha tied to internal corporate change, not external macro cycles. They aren’t driven by inflation expectations, rate pivots, or sentiment whiplash. They are mechanical, behavioral, and repeatable. Forced flows create mispricing. Lack of coverage creates opportunity. Incentive realignment drives performance. And when the rest of the market is late, you already own the move.
For fund managers, this matters. Allocators are no longer impressed by exposure to consensus themes. They want to see the process. They want to see repeatable frameworks that capture what others miss. Special situations allow managers to demonstrate foresight, not because they predicted the future, but because they understood structure before the story unfolded. That’s what builds trust. That’s what compounds over time. And that’s why, in a crowded field, this part of the market still quietly separates the good from the average.
Spinoffs Are The Last Place Where Alpha Still Exists
The window on a spinoff is never open for long. Once coverage picks up and the story gets modeled, the mispricing begins to tighten. What was once an opportunity becomes a narrative. And by then, the edge has shifted to someone else. Currently, we’re seeing spin candidates with all the ingredients: forced divestitures, mandate-driven selling, minimal analyst attention, and fresh incentive structures. These are the setups that don’t just offer return. They offer a return with insulation from the noise.
The question isn’t whether spinoffs work. The question is whether you’re early enough to benefit from why they work. This is where Alpha still exists. If AI is no longer producing alpha, the answer isn’t to wait. It’s to pivot toward what still compounds quietly while the rest of the market chases headlines. Because by the time it becomes obvious, the asymmetry is already gone.