Portfolio Rebalancing

For investing models to be effective, every once in a while the portfolios need to be rebalanced to what we call a strategic asset allocation (the underlying allocation rules of the model).

A key feature of our portfolio and order management system is our rebalancing engine, the programmatic way we rebalance portfolios periodically, or to account for movement in the market, to ensure model accuracy.

Our rebalancing engine lets you rebalance the portfolios of your customers with pre-set rules, depending on your requirements. There are three ways you can rebalance portfolios: calendar-based, drift-based, and ad-hoc.

Just specify the type of rebalancing you need and our system will automatically manage your portfolios in line with those requirements, making manual portfolio calculations (and admin) a thing of the past!

Calendar-based rebalancing

Calendar-based is as simple as it sounds: rebalance at a given point in time, periodically. That means that if the rules are set to automatically rebalance every month, it’ll rebalance on that date, every month.

Quarterly is also a common rebalancing time frame. Anything over that is a bit unorthodox, but in theory, you can rebalance whenever you want to, there's no right or wrong answer.

Drift-based rebalancing

With drift-based rebalancing, the rebalancing engine will automatically trigger orders to rebalance portfolios if the asset allocation drifts away from the strategic weight to a defined point, say +5%.

We call this the drift point or variance point. So if any instrument or any security is more than a defined percentage away from the asset strategic weight, it rebalances.

If the programmed rules are for the drift point to be triggered at +/- 5%, and your portfolio drifted +5%, the rebalancing engine would automatically send orders to the Order Management System to buy and sell assets accordingly.

Ad-hoc rebalancing

Ad-hoc rebalancing is literally what it sounds like: you can rebalance on an ad-hoc basis, whenever your team decides. Giving you total control over portfolio management.

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