When an asset class has breached its corridor width in a Percentage-of-Portfolio rebalancing method, which of the following actions is appropriate? A) Rebalance entire portfolio to target weights B) Rebalance only the breached asset class to its target weight, and add (subtract) the amount sold (bought) to (from) other asset classes C) Rebalance only the breached asset class to its threshold weight, and add (subtract) the amount sold (bought) to (from) other asset classes
A. Although sometimes the manager has discretion to rebalance so that everything is back within the corridors, but not necessarily at the SAA weight. This gives the manager the opportunity for tactical asset allocation.
A
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Aye
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