Overlay


Overlay
A management style that harmonizes an investor's separately managed accounts, preventing the formation of inefficiencies. Overlay management uses software to track an investor's combined position from the separate accounts. Any possible portfolio adjustments will be analyzed by the overlay system, which ensures the overall portfolio will remain in balance and prevent any inefficient transactions from occurring.

When an investor has separately managed portfolios, that investor is placing assets under the control of different managers. This can cause inefficiencies if the managers begin making transactions that either increase the risk of the overall portfolio, have negative tax effects, or unbalance the investor's positions.

For example, if one of the separately managed account traders purchases an asset and another trader sells it, the investor will be left with a neutral position and two transaction fees. Overlay management seeks to improve the communication between the separate managers, allowing for increases in transaction efficiency.


Investment dictionary. . 2012.

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  • Overlay — may refer to: Overlay architecture, term used to describe ‘event architecture’ and relates to the temporary elements that supplement existing buildings and infrastructure to enable the operation of major sporting events or festivals. Overlay… …   Wikipedia

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  • overlay — Ⅰ. overlay UK US /ˌəʊvəˈleɪ/ verb [T] (overlaying, overlaid, overlaid) ► to cover something with a layer of something else: »Sticky tracing paper overlaid on street maps lets travelers chart their course again and again. overlay sth with sth »By… …   Financial and business terms

  • overlay — overlay, overlie 1. The addition of the prefix over makes both verbs transitive (i.e. take an object) and therefore they do not entirely correspond to the grammatical functions of lay and lie. The past tense and past participle of overlay is… …   Modern English usage

  • Overlay — O ver*lay , v. t. [imp. & p. p. {Overlaid}; p. pr. & vb. n. {Overlaying}.] 1. To lay, or spread, something over or across; hence, to cover; to overwhelm; to press excessively upon. [1913 Webster] When any country is overlaid by the multitude… …   The Collaborative International Dictionary of English

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  • overlay — [ō΄vər lā′; ] also, and for n.always [, ō′vər lā΄] vt. overlaid, overlaying 1. to lay or spread over 2. to cover or overspread, as with a decorative layer of something 3. Printing to place an overlay upon n. 1. anything laid over another thing;… …   English World dictionary

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  • overlay — index overcome (overwhelm), overlap Burton s Legal Thesaurus. William C. Burton. 2006 …   Law dictionary

  • overlay — (v.) to cover the surface of (something), c.1300, from OVER (Cf. over) + LAY (Cf. lay). There also was an overlie (late 12c.), but it had been merged into this word by 18c. The noun in the printing sense is attested from 1824; meaning transparent …   Etymology dictionary