CHAPTER 32Determining Investment Style

Historically, consultants and plan sponsors have used several ways to determine a manager’s investment style. The sequence of logic underlying style identification is as follows: return patterns of groups of managers are observed, and clusters of managers are identified. Managers are interviewed to determine the orientation of their investment philosophies, and their portfolios are examined to determine if there are common portfolio characteristics or factors. If there is sufficient commonality in manager philosophies, portfolio characteristics, and subsequent returns, then the type of investing can be labeled a style.

Managers with similar investment philosophies or “styles” will, on average, produce performance ...

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