The advantage of a synthetic enhanced index strategy?

CFA Level III Equities
#1

On page 285, the curriculum book 4, why does it says that synthetic enhanced indexing strategy has the advantage of being straightforward? The stock-based indexing strategy looks more straightforward to me.:slight_smile:

#2

The stock based one is anything but simpe , a typical index has 600 to 1000 names . To create a replica you’d have to invest a lot of time , effort and cost in building , maintaining and rebalancing individual positions.

How do you say that that is simple?

#3

Thanks. Now I understand that the enhanced indexing is easier to carry out although it might be harder to understand.

#4

However synthetic enhanced indexing requires more IC to produce IR in comparison to manager following stock based enhanced indexing

(IR = IC Sq rt IB)

Stock based one can take more independent decisions (thus producing high IB)