Glossary · Portfolio operations
Drift band
A drift band, or rebalancing tolerance, is the amount a holding may deviate from target before a rebalance is triggered.
Bands are usually expressed as an absolute percentage of the portfolio or as a relative percentage of the target weight. The two produce very different behavior on small positions: a five percent absolute band never triggers on a three percent holding, while a twenty-five percent relative band triggers frequently.
Whichever convention a firm uses, the requirement is that it is written down, applied consistently and defensible when a client asks why their portfolio was or was not traded.
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