Fund of Funds, Portable Alpha, and Portfolio Optimization
研究了基金经理在资产配置基准约束下，如何通过分解跟踪误差来分离基金阿尔法，实现超额收益最大化，为投资者和基金经理优化跟踪误差约束及选择基金提供框架。
The authors examine the portfolio optimization problem that arises when a manager9s mandate is a fund of funds with an asset allocation benchmark. The portfolio manager9s objective is to maximize the portfolio excess return over the benchmark subject to given tracking errors. The authors decompose total tracking error into two components—the deviation from the benchmark and the additional risk factors associated with fund alpha. By quantifying the contribution of each component of portfolio excess return, the authors show that the performance of the style-constrained portfolio is determined by the active alpha–seeking skill of the portfolio manager and that fund alphas can be separated from their style loadings and are portable. These findings will not only help investors determine optimal tracking error constraints, but will also provide a framework for portfolio managers to identify funds with certain characteristics in order to achieve an optimal portfolio return. <b>TOPICS:</b>Manager selection, statistical methods, VAR and use of alternative risk measures of trading risk