The portfolio matches, as closely as possible, the characteristics of the benchmark. A deviation on any of these characteristics from the benchmark's value incurs a penalty cost to the portfolio. In this manner, the portfolio is kept strictly in-line with the benchmark. Comment Beta Controlling beta ensures that when the market moves the portfolio tends to follow suit.
Beta is targeted at a value of one.
The portfolio is targeted to have the same volatility as the benchmark. This forces diversification of the portfolio. The benchmark is divided in to 10 sectors and the portfolio tracks the percentage weight of each sector. This is a refinement on sector control. There are 56 industries, the portfolio tracks the weight in the benchmark of each industry and adjusts its holdings accordingly.