A manager aiming to build a well-diversified portfolio with a specific active investment strategy is likely to invest in which type of fund?

A manager looking to construct a well-diversified portfolio with a specific active investment strategy would likely choose hedge funds. Hedge funds are known for their active management approach, which includes a variety of strategies aimed at generating high returns. These funds often employ techniques such as short selling, leverage, and derivatives, allowing managers to express their views on particular sectors, regions, or asset classes.

In contrast, market index funds are designed to passively track a specific benchmark index, thus not utilizing an active investment strategy. While commingled funds allow for pooling of resources to invest in multiple assets, they may have limitations regarding the active management style that is often sought after in sophisticated investment strategies. Private equity funds typically focus on investing in private companies or buyouts, which can involve long hold periods and are not typically seen as tools for creating a diversified portfolio with a market-oriented active strategy.

Overall, hedge funds provide the flexibility and active management necessary for a manager who wants to implement a targeted investment strategy while also seeking diversification within a portfolio.