plan sponsors can choose to allocate capital across both active and passive strategies, thus implementing their views where they believe value in excess of the benchmark can be added. The addition of active managers to the plan creates the need to manage and monitor the associated risks. However, before allocating active risk, a plan sponsor will need to better understand the return, risk, and diversification characteristics of active managers within each asset class. These characteristics are essential in defining in what areas of the market it pays to have assets actively managed. We would suggest the usage of a robust universe of institutional manager data. Peer universe data provides key insights into determining the potential for excess returns above respective benchmarks, associated tracking errors, and diversification or correlation benefits present in the asset class. Table 15.1 highlights the characteristics for various asset classes. We can draw some easy conclusions from the analysis. First, historically international developed and small-cap growth managers have been able to achieve superior risk-adjusted performance, as evidenced by their high information ratios. Second, domestic large-cap equities have historically had difficulty adding value above their benchmark and have been experiencing approximately 600 to 700 basis points of tracking error. Last, it is clear from the correlation analysis that in the international developed and emerging markets active TABLE 15.1 Peer Universe Data for Different Asset Classes Annualized 10-Year Median Peer Universe Statistics U.S. Large Cap Growth (LCG) U.S. Large Cap Value (LCV) U.S. Small Cap Growth (SCG) U.S. Small Cap Value (SCV) International Equities (EAFE) Emerging Equities (EMER) Core Plus (CORE+)   ER (bps) TE (bps) IR 113 715 0.16 124 628 0.20 805 1,280 0.63 282 918 0.31 346 661 0.52 425 832 0.48 57 126 0.43 ER-Excess return. TE-Tracking error. IR-Information ratio.   Correlation               Matrix LCG LCV SCG SCV EAFE EMER CORE+ LCG 0.07             LCV 0.01 0.24           SCG 0.00 0.05 0.27         SCV 0.01 0.01 0.00 0.25       EAFE 0.00 0.05 0.06 0.10 0.30     EMER 0.05 0.00 0.07 0.11 0.04 0.32   CORE+ 0.02 0.06 0.00 0.03 0.03 0.08 0.22