Using the selected stocks, the portfolio is implemented to manage risk and to trade efficiently. In terms of risk management, the portfolio is sector neutral, whereby portfolio sector weights are set to approximate the sector weights of the benchmark S&P 500 index. By maintaining a sector neutral portfolio, tracking error due to relative sector returns is reduced.
The GSIF seeks to implement the portfolio as efficiently as possible. GSIF students monitor the portfolio on an ongoing basis, even during periods when classes are not in session, and make timely reports on the performance of the portfolio. As sector teams evaluate new information and decide to buy or sell names, the portfolio is rebalanced in a disciplined manner. During rebalancing, trades may be made in stocks whose portfolio weight is significantly under- or over-weighted relative to its target weight or when necessary to maintain sector neutrality. In all cases, the implementation is designed to consider whether the expected benefits outweigh the direct and indirect costs of trading.
For more information about the Graduate Student Investment Fund, please contact Dr. Timothy Marlo at email@example.com.