impact on the distribution of risk within the overall portfolio. The two main classes of investment risk we will address in this context are market risk (i.e., benchmark risk) and active management risk (see Chapter 13). In the context of market risk, the size of a plan has historically had a material impact on which asset classes have been available for investment. Typically, smaller plans have had less diversification at the asset class level, limiting their investments to traditional domestic equity and bonds. In the context of Chapters 25 to 28, we recommend that smaller plans diversify into new and alternative asset classes to improve risk-adjusted returns. Additionally, the proliferation of commingled vehicles has provided smaller-program investors with access to asset classes that previously have not been available. Asset classes that are typically overlooked by the smaller plans include: real estate, high-yield bonds, international equities, emerging market equities and fixed income, hedge funds, and private equity. Many investors and investment committees at the smaller end of the size spectrum feel obligated to use separate accounts to prove their active customized fiduciary oversight role. The problem with this practice is that separate account fees on small accounts are typically quite expensive, which leads investment committees to overallocate capital to individual managers in order to hit fee break points and account minimums at the expense of good diversified investment policy. The risk associated with this practice at the smaller end of the size spectrum is the resulting concentration of active manager risk. Concentrated active management risk can result from too few active managers, in many cases one per asset class. The subsequent lack of diversification of active manager risk at the total portfolio level can reduce the expected total return by limiting the plan's comfort with concentrated, potentially high-return managers. While there is nothing inherently wrong with significant active management risk, investors and investment committees recognize that unlike market risk, active risk creates a divergence of their performance from that of their peers. This peer risk generally leads plans to feel comfortable with between 100 and 300 basis points of active risk, an amount that does not significantly increase the volatility of total plan returns. In the context of Chapters 13 and 14, we discussed the importance of creating an overall risk budget with the key objective of diversifying active management risk. Given the relatively small appetite for active risk of most plans, it is important to try to create as much return as possible per unit of active risk. It is especially important at the smaller end of the program size spectrum to make sure active management risks are desired, understood, monitored, and adequately diversified during implementation. On the other end of the size spectrum, large and superlarge plans typically have sophisticated internal and external investment resources to create complex diversified portfolio structures. Larger plans may appear properly diversified across asset classes on paper but have significant implementation challenges. One of the biggest challenges to larger plans is finding enough complementary high-quality managers to implement policy in smaller-capitalization and high-trans action-cost asset classes.