"institutional style" of investing

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May 23, 2007 7:05 pm

I heard this company pitching "institutional style" of investing, what exactly is that?  How is that different from the retail/regular style of investing?

May 23, 2007 8:54 pm

By employing an ever- increasing use of non- correlating alternative investments. Traditionally, that meant real estate, but more and more the "smart money" is incorporating hedge funds, managed futures, private equity, direct investment, and international realty as a way to smooth out their returns and minimize volatility.


This is partly how the big endowments such as Yale and Harvard have produced excess returns and below-"market" deviations....

May 23, 2007 9:32 pm

They may simply mean buyong I class shares and charging a fee

May 24, 2007 3:03 am
bluestar:

I heard this company pitching "institutional style" of
investing, what exactly is that?  How is that different from the
retail/regular style of investing?





No A-shares.



More seriously, usually more professional management at the portfolio
level, with work done to make optimised portfolios and include multiple
asset classes.



You tend to see more indexing and greater awareness of where you can
(alternative investments) and cannot (stocks/bonds) get alpha.



Sometimes you see some hedging done at the portfolio level, eg keeping small rolling positions in deeply OTM index puts.



But then some institutions are dumb, and they buy A-shares.

May 24, 2007 11:38 am

Exactly.. There are using cheap instruments such as ETF's and Index Funds to gain beta exposure to certain effificent markets, and using alpha-generating managers in certain markets to get excess risk- adjusted returns. Also, their mandates for alternative and direct investments has been steadily increasing in recent years...

May 24, 2007 11:46 am

It may have to do with the concept of "liability matching," something many institutional portfolios practice. It's more relevant than index performance benchmarking, especially for insurance companies and pensions with their fixed and largely known future liabilities.

May 24, 2007 5:20 pm
Sailor25:

It may have to do with the concept of "liability
matching," something many institutional portfolios practice. It's more
relevant than index performance benchmarking, especially for insurance
companies and pensions with their fixed and largely known future
liabilities.





ALM, is very relavent to anyone with liabilities (e.g living expenses).