Enhanced Indexing Strategy - Primary Risks

In this kind of a strategy, the smaller funds/ individuals try to replicate a relatively fewer number of issues as used in pure bond indexing, without acquiring each issue in the index. Yet, they construct a portfolio by matching primary risk factors without acquiring each issue in the index. However, in such cases, once the portfolio manager tries to overlook more number of issues tracked by the index, the risk factor gets increased for tracking error. The manager tries to maintain major primary issues like duration by leaving the same on index, but tries to take some other factors which he could control actively.