the popularity of GTAA, and it is steadily becoming a mainstream product for the largest, most sophisticated institutional investors. STRUCTURE OF A GTAA PROGRAM Part 1: Completion As a result of increased specialization of active managers and the breadth of product offerings, the number of investment managers in institutional portfolios has increased dramatically. For example, where balanced managers dominated the marketplace 20 years ago, we now routinely observe managers that might only focus on small-capitalization value stocks in the United States. One institutional client for which we manage assets divides its strategic benchmark into 14 different pieces, with multiple managers within each of these. In this specialized-manager structure, who manages the portfolio's overall asset allocation? Often this is neglected, but this need not be the case as the completion element of GTAA can provide the glue for a diversified multimanager investment portfolio. A completion portfolio is designed to explicitly remove unintentional asset allocation risk. Described in Chapter 22 in more detail, multiple activities can create unintentional asset allocation risks. The first and probably most important is drift relative to benchmark in the underlying portfolio allocations caused by fluctuations in asset valuations.7 Depending on how frequently clients "true up" their portfolios, drift risk can contribute upwards of 50 percent of total active risk, effectively swamping the intentional active risk from traditional security selection activities. Of course, returning the portfolio to its strategic benchmark is not free, as transaction costs eat up some of the benefits of rebalancing. Cash sitting in managers' accounts, currency deviations driven by stock selection activities, and manager or benchmark transitions also create unintentional risk that is frequently left unmanaged. While institutions sometimes hire firms to handle subsets of these activities, the most natural and generally least costly approach is to place these responsibilities with a GTAA manager. The GTAA manager can monitor and remove unintentional benchmark deviations due to drift, cash holdings, transitions, and even contributions to and redemptions from the portfolio. More elaborate possibilities include implementing an overall currency hedge, moving alpha ("porting" it) from one asset class to another, and managing intermediate-term changes in strategic exposure driven by trustee boards or investment committees. In very complex portfolios, or portfolios with frequent cash flows, institutions might consider using their custodian as a specialized completion manager separate from a GTAA program. In these cases, the potential additional transaction costs from the completion and GTAA 7If left unspecified, multi-asset-class benchmarks reset to their fixed proportions at the same frequency as performance is reported, typically monthly. Increasingly, clients are specifying that benchmark weights drift with asset valuations over longer horizons, permitting benchmark reset frequencies such as quarterly, semiannually, or annually.