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What is structured equity?
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6th Dec 2009 by Amelia Timbers
Structured equity is a method of investing that on its face may mimic indexing, but is actually based in quantitative models designed to control risk. As a result, structured equity also ends up limiting alpha, or gain above the market, but it also controls volatility, or the variation of returns. The goal of investors using a structured equity style is to control tracking error while beating a designated benchmark, such as the S+P. Thus structured equity gets the best of both world- the advantages of returns slightly above an index, but with tight controls that limit risk. Ultimately structured equity follows the same rules of finance that govern other strategies- risk equals reward. In structured equity, the risk is managed quantitatively.
Structured equity is a method of investing that on its face may mimic indexing, but is actually based in quantitative models designed to control risk. As a result, structured equity also ends up limiting alpha, or gain above the market, but it also controls volatility, or the variation of returns. The goal of investors using a structured equity style is to control tracking error while beating a designated benchmark, such as the S+P. Thus structured equity gets the best of both world- the advantages of returns slightly above an index, but with tight controls that limit risk. Ultimately structured equity follows the same rules of finance that govern other strategies- risk equals reward. In structured equity, the risk is managed quantitatively.
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4th Dec 2009 In Investing
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