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By Scott Burns | 09-16-2010 06:12 PM

Sizing Up a Tactical Strategy

There are market inefficiencies that you can capture with a good disciplined process, says SSgA head of investments Dan Farley.

Scott Burns: Hello, there. I'm Scott Burns, Morningstar's director of ETF research, coming to you live from Morningstar's ETF Invest Conference.

Today I'm joined by SSgA's Dan Farley, and we're going to talk a little bit about tactical versus strategic portfolio tilting.

Dan is the global head of investments for SSgA's Multi Asset Class Solutions team, and he oversees over $190 billion of institutional money worldwide.

Dan, thanks for joining me.

Dan Farley: Good to be here.

Burns: So Dan, one of the hottest topics in the investing space right now is the role of tactical decision-making in portfolio, especially when you overlaid it on what is generally a strategic portfolio allocation.

Farley: Sure.

Burns: What do you guys practice at State Street?

Farley: So, within SSgA, we've been running tactical money for decades now. And so it's an area that we believe there are market inefficiencies that you can capture with good disciplined process.

I think that tactical asset allocation, like any active strategy, relies on a manager who has a good skill, has good ability to identify trends in the marketplace and move to be able to capture and take those trends.

So, to the extent an investor is looking for an additional source of return, tactical could or should be something they should consider. Of course, there is lots of different ways to implement tactical.

Burns: Right. And I think that's part of the confusion out there, "what is this tactical shifting?" Are we making real active bets buying individual securities or is it more of a tilting as you kind of alluded to earlier?

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