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Whitepaper

Overlays and Transition Management

August 1, 2020

An overlay typically uses derivative instruments such as futures to remove cash drag and plug the performance gaps created by policy imbalances. Futures require establishing a margin pool, but the same pool can be used to address multiple policy shortfalls simultaneously. Overlays can consequently be a capital-efficient, cost-effective, and nondisruptive solution to the performance risk created by policy shortfalls. 

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