Benefits of Active Style-Management:

		Locks in excess returns
		Provides diversification
		Eliminates the single-style tendency toward style drift
		Provides a safety net to Cushion style shifts
		Contributes to a more consistent performance pattern
		Stands alone or complements other portfolio-management techniques
		Saves plan sponsor time and fees

Disadvantages of Active Style-Management

1. Reduces the manager’s absolute control of the equity asset mix
2. It is very difficult to market to clients
3. It complicates the task of research and portfolio management
4. Not the best strategy when both growth and value stocks underperform or outperform.

Style Benchmarks

There are two fundamental uses for style benchmarks in the context of performance measurement. Style benchmarks are intended to reveal the manager’s ability to add value over the market, and provide a more appropriate hurdle for calculating performance-based fees.

Manager Alpha

Market Risk Premium

Risk-Free Rate

1. Basket of Stocks: These securities are weighted in some appropriate way to reflect the manager’s style, resulting in a portfolio whose traditional characteristics match those of the manager’s invested portfolio.

2. Style index: The second type of style benchmark is a style index or weighted average of a selection of style indexes.

3. Style universe mean or median: The Frank Russell Company and other consultants track enough managers to categorize them by investment style, such as growth managers, or market-oriented managers, with a value tilt.