RT Journal Article SR Electronic T1 Implementing 130/30 Equity Strategies JF Special Issues FD Institutional Investor Journals SP 56 OP 59 VO 2008 IS 1 A1 Tony Foley YR 2008 UL https://pm-research.com/content/2008/1/56.abstract AB The high degree of correlation among the returns of quantitative equity strategies during July and August 2007 has been extensively analyzed, and the literature to date has focused largely upon return forecasting models as the source of that correlation. This topic is particularly relevant to plan sponsors making allocations to “relaxed-long” or “130/30” strategies because, among other things, those strategies are predominantly implemented using quantitative processes and generally target higher levels of tracking error than is the case for analogous long-only strategies. This article argues that overlapping risk models constitute an overlooked source of correlation among quantitative equity managers. In particular, it demonstrates that the deployment of common risk models can greatly narrow the opportunity set used in security selection and that during a market dislocation contagion can spread among managers even in the absence of a high degree of overlap in their forecasting models. The article concludes by considering the implications of this analysis for both investment managers and plan sponsors.