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There are many ways of implementing a portfolio. For a smaller setup, fund managers made the investment decision by themselves and contact brokers to execute the trade. They will then fill up the trade ticket and hand it over to the settlement department.
Most fund managers construct a model portfolio so that various similar investment accounts can follow the same investment decision.
The basic principle of portfolio implementation is to ensure that all clients having similar investment mandate will be treated equally. Therefore, portfolio implementation must be performed together for a group of similar investment accounts. All the buy orders will go to the traders at the same time regardless of the size of your investment account. This is to ensure equal treatment of your various investment accounts without favouring any particular client. Most institutional investor will require fund managers to have a portfolio implementation policy in place.
Portfolio implementation basically involves portfolio re-balancing, cash management and pre-trade compliance.
We will discuss the details of constructing model protfolio, re-balancing, cash management and pre-trade compliance in separate articles:
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