Abstract
The author divides the asset allocation decision into two asset classes: beta drivers and alpha drivers. Beta drivers, which provide broad economic exposure to the financial markets, are established by the strategic asset allocation decision. Alpha drivers are designed to provide added return beyond the return offered through passive exposure to the financial markets. Alpha drivers, chosen as part of the tactical asset allocation decision, are designed to facilitate the long-term funding goals of an organization by seeking added value. Examples of how beta and alpha drivers may be used in strategic versus tactical asset allocation are provided.
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