Active Extension

The firm's Active Extension strategy enables investors to seek higher levels of alpha without accepting lower expected information ratios. By removing the short constraint and maintaining a constant 100% exposure to the equity market, the portfolio optimization process improves portfolio efficiency by enhancing the portfolio's ability to under-weight securities through short positions.  Industry, common factor and company specific risks are all tightly controlled to minimize the probability of unwanted downside risk. The strategy may be run against US, European, or Japanese large or all cap benchmarks. Large cap portfolios typically hold 150 long and 50 short positions and individual stock exposures are limited to benchmark weights +/-2%.

There are several unique aspects to L.A. Capital's Active Extension strategy.  First, the opportunity set is generally limited to the benchmark constituents to better control active risk. Both the portfolio construction and implementation process are managed dynamically to limit unwanted risk during periods of higher uncertainty.  The portfolio's risk budget expands slightly when return opportunities improve but contracts as the market conditions become more volatile and the pricing of risk factors becomes less clear.  Implementation costs are aggressively managed through a dynamic trading process as market orders are placed continuously throughout the month to capture the mean reverting short-term price patterns of equities and to minimize market impact costs.