Abstract
A growing number of investors has become interested in introducing greater flexibility into their policy portfolios. This flexibility can be accomplished in several ways, such as giving broader mandates or eliminating the long-only constraint. A more comprehensive approach would be to separate how investors get the return of the policy portfolio (beta) from how they seek to exploit security mispricing (alpha). For that approach to work, more large funds need to develop stronger capabilities, more institutional-quality need to offer alpha-only strategies, and managers need to enter the market. The master manager would be a hybrid of indexer, overlay manager, transition manager, master custodian, and consultant with the role of facilitating advanced forms of institutional portfolio management.
Published Version
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