What classifications can total return mandates be based on?

Total return mandates can be classified based on target active return and active risk levels because these classifications directly relate to the objectives and risk parameters defined by the portfolio strategy.

When focusing on total return, investors are often interested in maximizing their returns relative to risks they are willing to take or specific benchmarks they are measuring against. The concept of active return refers to the return achieved over and above a benchmark or a risk-free rate, while active risk (or tracking error) measures the volatility of those returns compared to a benchmark. Thus, a mandate that centers on specific target active returns and risk levels outlines a clear strategy for aiming to outperform benchmarks while taking on a computed level of risk, crucial in the context of total return investment strategies.

Engaging with these active management concepts allows the portfolio manager to align their strategies with the investor's needs, making it an appropriate classification for total return mandates.