Research paper // Portfolio construction : seeking consistency between strategic risk and active risk

Alexis Flageollet
Senior Financial Engineer
Seeyond, Natixis AM    

Franck Nicolas
Head of Investment and Client Solutions
Natixis AM

« When investors purchase an actively managed multi-asset classe portfolio, they expose themselves to three types of risk:

- the risk which derives from the strategic allocation the investor has chosen (volatility);

- the risk resulting from the tactical management implemented by the allocation manager for this strategic allocation (allocation tracking error);

- and finally, the selection risk resulting from the different investment vehicles, if they are actively managed (selection tracking error).

As a result, how can we ensure that all the portfolio-related risks actually correspond with the investor's expectations ? »

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