Defining rebalance bands

You can define rebalance bands with tolerance ranges that define how far a portfolio’s exposures may drift from their target model weights before action is required. Rather than requiring a portfolio to match its model exactly at all times, rebalance bands give you an acceptable drift zone for each asset class grouping or individual holding.

Rebalance bands are particularly useful for large or complex portfolios where minor drift is expected and not all deviations require immediate action.

How rebalance bands work

You define bands relative to the model weight for a given group or holding. Each band consists of the following:

You can configure bands at two levels:

• Group level: Applies to a grouping as it appears on the Rebalance dashboard, for example EU Equities. You can set a default band that applies to all groups, and then override it for specific groups with a differing risk profile.

• Holding level: Applies to individual instruments within a portfolio. You can set a default band for all holdings, and specify overrides using a LUSID filtering expression.

Example

Imagine your model weight for a holding is 15%, with the following bands configured for equities in your portfolio:

• Rebalance Band Upper: 10.00%

• Tolerance Upper: 0.50%

• Rebalance Band Lower: -15.00%

• Tolerance Lower: 1.00%

The acceptable drift range is therefore 0% to 25%. The Rebalance dashboard displays an amber warning when the holding Weight is between 0.00% to 1.00% on the lower end and 24.50% to 25.00% on the upper end.

Configuring rebalance bands

You can configure rebalance bands via portfolio mappings.

1. Navigate to Data Management > Portfolio Mappings.

2. Locate your portfolio mapping and click Edit.

3. Select Rebalance Bands > Create relational dataset.
   

4. Specify a Scope and Rebalance Bands Code that, together, uniquely identify the set of rebalance bands.

5. Click Add data point and enter the following values:

   • Location Type: The level to configure the rebalance band at as described in the previous section; either Group or Holding

   • Location: Enter one of the following:

     • ALL: Applies the band to all assets of the Group or Holding

     • For Group: Specify the group path as it appears in the Rebalance dashboard, for example EU Equities/Physical

     • For Holding: Specify a LUSID filtering expression, for example Properties[Instrument/AssetClass] eq 'Equities'

   • Rebalance Band Lower and Rebalance Band Upper: A percentage for the lower and upper hard limits; breaching these will show as red in the dashboard

   • Tolerance Lower and Tolerance Upper: A percentage for the lower and upper warning zones within the rebalance bands; breaching these will show as amber in the dashboard

   

6. Click Save and select your rebalance bands.
   

7. Save your portfolio mapping.

Once you have configured your rebalance bands, you can enable and view the drift charts in the Rebalance dashboard under the following columns:

• Model Difference

• Live Model Difference

• Resulting Model Difference

Enabling drift charts

To enable drift charts in the Rebalance dashboard:

1. Right click on any of the following column names:

   • Model Difference

   • Live Model Difference

   • Resulting Model Difference

2. Select Show drift charts.
   

Once enabled, you can hover over a chart to view details of the bands.