Rebalancing

October 2026

Institutional investors adopt long-term asset allocation targets to pursue specific objectives within a defined tolerance for risk.

Those targets, together with the investor’s liquidity needs and other constraints, are typically set out in an investment policy statement (IPS). Because asset allocation is a primary determinant of a portfolio’s risk and return, keeping the actual portfolio reasonably close to its policy targets is a central task of regular portfolio management. Portfolio weights drift away from their targets through normal market movement as asset classes produce different returns. Left unmanaged too long, this drift can lead to a different risk-return profile than that expressed in the IPS.