Identify which manager is most appropriate for Parade. Justify your response.

Upon choosing a manager, Lute must allocate the funds either to a separately managed account (SMA) customized for Parade or a pooled vehicle called Diversified. In addition to low turnover and trading costs, Parade’s IPS also prioritizes the following characteristics for its investment: transparency, investor behavior, cost, liquidity, and tracking risk. While each type of investment vehicle offers distinct advantages, Parade is unclear as to which advantage is applicable by type.

Frances Lute is an investment manager for a large institutional investment management firm in London. His client, Parade University (Parade), has an endowment worth approximately GBP1.6 billion. Lute is considering three active investment managers in order to add one new style. Parade’s investment policy statement (IPS) highlights the endowment’s preference for low turnover and trading costs.
Lute is particularly concerned about portfolio construction and the prospective implementation of investments within the portfolio. All else equal, Lute has identified these distinguishing characteristics for the processes affecting portfolio construction by the three managers.

• Manager A uses hard-stop losses to manage risk.
• Manager B’s portfolio can be liquidated within five business days or less.
• Manager C’s portfolio turnover is greater than the frequency of signals generated.

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Manager A Identify which manager is most appropriate for Parade. (Circle one) Manager B Justify your response. Manager C