The risk budget for active management is traditionally expressed as a tracking error relative to a long-term passive strategic benchmark, which in turn is determined by an Asset-Liability Management (ALM) analysis. But very often the size of this risk budget is determined independent of the strategic benchmark, leading to a skewed risk/return trade off. In this paper we show how the size of the risk budget can be determined as an integral part of an ALM analysis, providing internal consistency between the long and short term aspects of the investment policy.