Glossary
Rebalancing
Rebalancing is the process by which a portfolio is periodically, or when tolerance thresholds are breached, returned to its strategic target allocation. By selling overweighted and buying underweighted positions, the mandate's Risk Profile remains continuously aligned with the Investment Guidelines.
At a glance
- Rebalancing is rule-based, carried out either on a schedule (for example, quarterly) or triggered when an asset class deviates from its target allocation.
- It disciplines portfolio management by enforcing a systematic return to the agreed Risk Profile.
- Tax implications and transaction costs are taken into account when rebalancing.
Frequently asked questions
The frequency depends on the agreed Investment Guidelines. Periodic reviews are common, as are automatic interventions when an asset class exceeds its permitted range. Rebalancing too frequently can increase transaction costs; rebalancing too infrequently can shift the Risk Profile away from its target.
Part of the topic
Discretionary Mandates
This entry is for general information purposes only and does not constitute investment, legal or tax advice. It is a simplified summary of the legal position and tax treatment.