Well-Constructed Portfolio
A well-constructed portfolio should deliver the characteristics promised to investors in a cost-efficient and risk-efficient way. The well-constructed portfolio possesses: a clear …
level III
Risk Budgeting
Risk budgeting is a process by which the total risk appetite of the portfolio is allocated among the various components …
Active Share and Active Risk
Investment approaches can also vary according to whether the manager is highly benchmark-aware or is benchmark-agnostic (i.e., pays little attention to the benchmark). Each …
Approaches to Portfolio Construction
A manager’s portfolio construction process should reflect her beliefs with respect to the nature of her skills in each of …
Fundamental Law of Active Management
Integrating the Building Blocks: Breadth of Expertise A manager may be more or less successful at combining these three sources …
Building Blocks of Active Equity Portfolio Construction
Investors who pursue active management are looking to generate portfolio returns in excess of benchmark returns (adjusted for all costs) …
Active Return
The active return (RA)—of an actively managed portfolio is driven by the difference in weights between the active portfolio and the …
Creating Quantitative Active Management Strategies
The quantitative active investment strategy has a well-defined process: Define the market opportunity. Acquire and process data. Back-test the strategy. …
Creating Fundamental Active Management Strategies
The broad goal of active management is to outperform a selected benchmark on a risk-adjusted basis, net of fees and …
Top Down Strategies
Top-Down Strategies Top-down strategies use an investment process that begins at a top or macro level. Instead of focusing on …