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The History of Rebalancing of the Fund

In this note we dig deeper into the rebalancing question and examine how the Fund’s rebalancing rules have impacted overall risks and returns.

30 March 2012

We find that the rules for rebalancing have served the fund well and contributed to both lower risk and higher returns compared to a drifting mix portfolio.

We also find that the Fund’s current rebalancing regime has provided both higher returns and higher Sharpe ratio compared to a calendar based regime with fixed quarterly rebalancing. Finally, we find that the current procedure with partial rebalancing, where inflows to the Fund leads to changes in the actual index, appears not to have had the same positive impact on the net Sharpe of the Fund despite its cost reducing effect.

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