The most cost efficient strategy to deal with Dashe’s concerns following the equity market correction is a(n):
rebalancing to policy weights by selling bonds and purchasing equities.
rebalancing by replacing the highest-tracking-error manager with low-cost index exchange-traded funds (ETFs).
overlay using equity index futures.
Rebalancing by selling bonds and buying equity is costly, overlay is cost-efficient.
“B is incorrect because the IPS does not allow for index ETFs”
However, what is the hint from the text that ETFs are not allowed? Is it because only active equity and FI managers are allowed, and ETFs is a passive management strategy?