Perspective: Active extension strategies -- Relaxing the long-only constraint

In the quest to optimize portfolio returns, standard benchmarking practices with long-only constraints can keep investment managers from fully leveraging their insights. In contrast, active extension strategies let managers short some stocks and reinvest the proceeds in additional long positions. As a result, managers can better leverage alpha with little increase in active risk. This Perspective discusses active extension strategies, appropriate shorting practices and risk controls, implications for manager selection and research, and benefits to institutional investors.  (Perspective, 20 Jul 2007, 9 pages)

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