Making a Thanksgiving feast is no small feat. It requires substantial preparation—from shopping for fresh ingredients to finding the best recipes to ensuring you have the required cookware.
Investors looking to streamline policy objective strategies have often found overlay management solutions to be key elements for identifying and achieving goals more effectively and proficiently. In other words, these solutions can produce better results for funds by allowing investors to work smarter, not harder.
Objective 2: Rebalancing
Rebalancing decisions and the subsequent actions can be difficult, time-consuming, and prone to the flaws of investor behavioral biases. Physically rebalancing a portfolio requires substantial staff resources in coordinating and communicating portfolio changes. A disciplined implementation rebalancing process through an overlay provides a framework that simplifies necessary actions, reduces trading costs, and provides a level of responsiveness that cannot be matched through physical rebalancing alone.
Additionally, rebalancing may be necessary at inopportune times. For example, the market turbulence in late 2018 saw the market reach lows on December 24, when many investors were enjoying the holidays. Having no need for a vacation, a disciplined overlay program continued to monitor the portfolios each day and kept it in line with targets during this period of heightened volatility. This program ensured the portfolios would maintain balance throughout any periods of market fluctuation.
The bottom line
The overlay objectives described above provide a framework that helps investors manage more efficiently and effectively to their required guidelines. This figurative extension of staff brings significant improvements to portfolio management with the possibility of portfolio returns that are higher than expected. The main role of overlay management solutions is to make life easier by allowing investors to focus on the core aspects of portfolio management.