When It Comes to Portfolio Transitions, Minutes Matter

As institutional investors, we most often represent risk as annual standard deviation or tracking error. But when we implement changes in our portfolios, the real-time risk happens much faster. Those standard deviations will impact portfolios not on an annual scale, but in hours or even minutes. What happens in those minutes can have lasting effects on performance.

Investors generally don’t have visibility to the real-time implementation slippage that can occur without an intentional focus on real-time exposures. Very few investors have detailed real-time post-implementation reporting to verify that their exposures were managed appropriately throughout the course of implementation.