Have any of you done work in estimating a strategy's capacity?
Lets say the strategy targets small caps, to what extent can daily volume be used as a proxy for slippage/liquidity?
I've tried to reverse engineer how things work at some larger funds and I'm getting some strange findings.
Looking at the Eaton Vance Small Cap Fund: https://institutional.eatonvance.com/media/4032.pdf
This is a $1.7b fund that has a 2.84% (or $48m) exposure to Valvoline, which trades around $30m per day. Surely entering a $48m position in a stock that trades $30m per day would have a disastrous effect on slippage? Even if they spread the trade over multiple days they're still a significant portion of the volume.
Submitted October 09, 2020 at 03:57AM by iambeingserious