Portfolio Rebalancing
It is often necessary to rebalance a portfolio against a model, or against another portfolio. For example if a fund receives a subscription and would like to maintain the weights of each security as the fund size increases, the manager would rebalance the fund with the new NAV. This is done using the system by creating a portfolio model from the portfolio before the subscription is added. Then the rebalance tool is used to calculate how much of each security needs to be sold or bought to meet the model weights with the new NAV.
The rebalance can be applied to more than one portfolio at the same time – i.e. match the target weights in several portfolios with or without changes to their NAVs and produce the total buys or sells across all the portfolios. It is also easy to use this tool to apply a rebalance in steps, so that it can be conducted over several days. This can reduce the tracking error at the time of a subscription or redemption by doing some of the rebalance before the subscription and some after. At any time the remaining balance can be calculated by the system.
|
|||