Practical Applications of Carrier Portfolios

Abstract

Institutional investors have long been challenged by the process of building portfolios to mirror the performance of a benchmark index, particularly when illiquid assets or large amounts of assets are involved. This research presents a method that is simple, linear and filter-based. In a practical example, it achieves lower tracking error than commonly used models.

In Carrier Portfolios , published the Fall 2013 issue of The Journal of Portfolio Management , Steve Kusiak, demonstrates an alternative to the traditional mean-variance optimization methods of using covariance matrices or regression-based models. The author is a Senior Research Analyst at Russell Investments in New York.