The law says you must prudently reduce Uncompensated Risk (UCR) and in order to do so a second step has to be measuring the amount of UCR in a constrained portfolio and to identify those assets that carry the UCR plague. In order to comply and enhance the portfolios returns with less risk you must take out the “bad apple” investments and replace them.
Preface: Management of Investment Risk Mgt 3rd Restartement Legal 2.2
If you missed Part One PDF:Unmeasured is Unmanaged Part One
If you missed Part Two PDF: Unmeasured is Unmanaged Part Two
Part Three – The “Proof is in the Pudding”Case study: The California State Employees’ Pension Plans PDF: Unmeasured is Unmanaged Part Three comment