capital is required. This makes it easy to combine with other sources of active risk within the same portfolio. This is in contrast to a common portable alpha strategy that transports alpha from a fixed income strategy onto an equity benchmark, because substantial capital is needed for the fixed income strategy in order to generate the excess return. The completion portfolio in a GTAA program can also make portable alpha strategies possible. For example, a portfolio that desires more active risk from its equity managers but doesn't want to increase its strategic equity weighting can transfer capital from its fixed income managers to its equity managers, then undo this implicit stock/bond bet by selling equity index futures and buying bond futures in equivalent proportions. Essentially, the completion portfolio frees the linkage between a portfolio's strategic asset allocation and the asset classes where active risk is derived, obtaining a more optimal allocation of active risk. Choosing a GTAA Manager There exist approximately 25 investment firms globally that credibly offer TAA/GTAA services. Some of these have not committed the resources to offer a truly global product and therefore offer only domestic TAA, and some firms have not developed a global derivatives trading capability. However, about 10 major global players exist in the modern GTAA industry, with more than 80 percent of market share concentrated in the top four players.26 We believe a strong GTAA manager possesses the following key traits: II A sound investment philosophy based on strong theoretical and proven empirical evidence. II A quantitative approach that can be intuitively explained. II A program that offers diversification in active risk across strategies, across investment themes, and across securities held in the portfolio. II An appropriate risk budget that does not rely too heavily on market timing. II An independent risk management group ensuring that investment philosophy and client guidelines are followed. II A strong commitment to continued research as models and markets evolve. SUMMARY The modern global tactical asset allocation program really comprises two separate strategies, completion and pure overlay. The completion element of GTAA flexibly and cost-effectively manages unintended asset allocation risk with limited capital and minimal disruption to underlying investment managers. The pure overlay of GTAA adds value from opportunistic long and short positions in asset classes and countries. ■Based on our estimates from publicly available data.