Improving Investment Returns: Manager Sizing With Active Risk

Overview

Evaluating manager sizing as a percentage of capital is a popular and common approach. While portfolio-level analysis on liquidity, beta, and volatility are frequently monitored, a minority of investment teams use active risk to size managers. By considering the return profile of a manager along with its size in the portfolio, active risk provides additional insight to risk management decisions, helps build better portfolios, and contributes to better governance.

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