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What is "use sector overlays to control risk"?

CFAI online practice question - Equity - Grasmere Asset Management Case Scenario

The fund primarily invests in the stocks of companies with poor earnings performance that are out of favor with the market and appear to be influenced by investor behavioral trends. Stocks are selected on the basis of company analysis by Grasmere’s analysts. The fund uses sector overlays to control risk.

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Take a look at volume 4 of the curriculum, p. 399.

It appears that they’re talking about adding sector funds (e.g., sector ETFs) to a portfolio of individual companies in that sector.

Simplify the complicated side; don't complify the simplicated side.

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