Institutional Portfolio Management

Abstract

Institutional portfolio management has two main goals: 1) to implement the policy risk of the institutional fund as efficiently as possible, and 2) to add value. While these two goals may be accomplished by beta drivers and alpha drivers, asset managers often attempt to extract alpha from beta drivers. This leads to expensive products that add more beta than alpha. To better manage institutional portfolios, beta products must be separated from alpha products, so that the two goals can be accomplished more effectively. This has implications both for the types of products produced by money managers and the types of products purchased by the institutional investor's staff.