CFAI 2010 real exam AM question 8 A

Why Brown’s calendar rebalancing methods would achieve same weighting in international equity holding compared to Malik’s percentage of portfolio? Since the closing weight is within the +/- 10% tolerence bands, so I though percentage of portfolio rebalancing does not have to be performed? is that right?

you need to look at all the asset classes.

one piece goes outside the band with the method - so everything therefore needs to be rebalanced back to the SAA.

thanks for the answer, I got it wrong to add the 10% to get the band but I should multiple by (1+/-10%) to get the band

So with Percentafe of portfolio is kind of all-or-nothing? If one asset class goes out of the band, all the portfolio is rebalanced to target?

Yes, assuming they’ve all moved away from target (which in this question they have). Your portfolio has to sum to 100% allocation. If you rebalance the UK Fixed Income class back to 40%, you’d only have portfolio weights summing to 95% unless you adjust the other classes as well.

It’s really a great question. Got me too.