Hi,
Can someone explain the completeness fund approach to me pls.
Thanks!
After you have made asset allocation to active equity managers, you add a completeness fund which when combined with your allocation to the active managers produces the same risk exposure as the investors benchmark. This ensures that your allocation doesn’t drift too much from the investors benchmark as it would when you only have active managers with varied benchmarks.
thx blinxbuckles - similartly can u elicit its differences to core-satellite/ portable alpha? the line to me is fine, i am confused about the motivations for the strategies…
A completeness fund is a portfolio of active managers with an overall risk exposure similar to the investor’s benchmark.
The goal is to minimize risk vs. benchmark but still maintain excess return.
We are core - start bringing satellites or overlay managers to get us alpha. We might find ourselves seeking too much risk/ style concentrations - so we COMPLETE(NESS) our fund. We might give up some alpha (misfit risk) for making the portfolio STYLE NEUTRAL relative to benchmark. But we are not increasing risks.