RT Journal Article
SR Electronic
T1 Portfolio Factory
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 7
OP 13
DO 10.3905/jpm.2022.1.364
VO 48
IS 7
A1 Bernd Scherer
YR 2022
UL https://pm-research.com/content/48/7/7.abstract
AB The author formalizes the concept of a portfolio factory as the automated implementation of an active model portfolio on a wide range of client portfolios that differ across benchmarks, regulatory constraints, or client-specific constraints. Within this context, the article shows that portfolio factory as an active portfolio optimization problem is equivalent to tracking error minimization between an active model portfolio and active client portfolio. This approach allows well-established portfolio optimization frameworks and creates greater acceptance among investment professionals because portfolio factories create optimal tracking portfolios.