# What is the smart way to reallocate money?

We are running a portfolio of fund managers in our fund. When one of the managers hits the max DD constraint we pull money from this manager. This may happen in the middle of the allocation period and we need to reinvest the money to the other managers. We cannot decrease the allocations for the remaining managers. What is the smart way to allocate the money we have pulled? I suspect it is easiest to answer this question in the MVO framework.

Any ideas and references are really appreciated.

Thanks,

• I voted to close this as it asks for a "smart way". The adjective "smart" points to something open-ended and subjective, all of which, with agreement from @Quantlbex, validates removal. – madilyn Jul 19 '13 at 5:20
• Here is the formal question. Let (w_1, w_2, w_3, ..., w_N) be the optimal mean-variance allocation that solves min w^t \Sigma w subject to <w, r>=c. Assume that we pool money from the manager "N". How to allocate money (v_1, ...,v_{N-1}) to managers 1,..,N-1 in such a way that v_i>w_i and the final portfolio lies on the efficient frontier? The problem is that usually removal of one manager will leave only a small portion of n efficient frontier. How to select the new value of c for optimisation – vkrouglov Jul 19 '13 at 11:53
• @kristine - I feel the better course of action, here, is to edit the user's question to be less subjective, rather than focus on one word. I'm all for closing questions for predefined reasons, but not before resolving linguistic ambiguities and seeing if the question can be useful in clearer context or wording. – Andrew Cheong Jul 19 '13 at 13:28
• @kristine What did Quantlbex write on here? – chrisaycock Jul 19 '13 at 16:19
• Just to clarify, I haven't written here yet, and I did NOT agree to close this question. I guess @kristine is refering to (part of) the justification I gave (based on help center) to close one of her questions which was about conferences and networking events. – QuantIbex Jul 19 '13 at 17:27