@article {Leibowitz25, author = {Martin L. Leibowitz and Anthony Bova}, title = {Active 130/30 Extensions and Diversified Asset Allocations}, volume = {2008}, number = {1}, pages = {25--47}, year = {2008}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Virtually all asset allocations have risks that are dominated by a 90\% or greater correlation with equities. This high correlation acts as an 800-pound equity gorilla lurking behind the multi-asset fa{\c c}ade of even the most diversified allocations. Benchmark-centric equity strategies such as active 130/30 extensions aim to have tracking errors (TE) that are largely uncorrelated with equities. Within equity-dominated allocations, these uncorrelated TEs should have little impact on fund-level volatility risk. Positive alpha opportunities from these strategies can therefore be particularly valuable because they can significantly increase the fund{\textquoteright}s total return with only minor increases in the overall volatility or other forms of {\textquotedblleft}beyond-model{\textquotedblright} risk. Moreover, because such strategies relate to the basic equity assets, they help minimize any {\textquotedblleft}stress beta{\textquotedblright} effects from short-term correlation tightening.}, URL = {https://guides.pm-research.com/content/2008/1/25}, eprint = {https://guides.pm-research.com/content/2008/1/25.full.pdf}, journal = {Special Issues} }