Implementing an Alternative-Focused Asset Allocation Strategy

As the lead portfolio manager of a large institutional investment fund, you have been directed to implement a new asset allocation strategy that aligns with the updated investment policy statement (IPS) set forth by the investment committee. The IPS now emphasizes greater exposure to alternative investments, particularly private equity and real estate, while maintaining a balanced approach to fixed income and equity securities. Your challenge is to outline a comprehensive implementation plan that details the steps you will take to transition the current portfolio to the target allocation while managing potential risks associated with the new allocation strategy.

Please discuss the key considerations in asset allocation implementation, including the impact of market conditions, liquidity requirements, the role of tactical adjustments, and the need for rebalancing in order to ensure adherence to the IPS guidelines. Additionally, consider how you will communicate these changes to stakeholders and the rationale behind your decisions.