Active weight

Active weight measures how far a portfolio departs from its benchmark. If technology is 25% of the portfolio and 20% of the index, the active weight is +5 points. A group the portfolio does not hold at all has a negative active weight equal to its benchmark weight.

Benchmark-relative mandates limit active weights rather than absolute ones. Example wording: “no active weight beyond plus or minus 5% of the benchmark”, per sector or per stock. Both sides bind: an underweight can breach as surely as an overweight.

Acclimetry’s benchmark-relative limit computes active weight as portfolio weight minus a supplied benchmark weight, both in percent of net asset value. The benchmark’s name and as-of date are part of the rule. Example: a group the portfolio does not hold is −20 points against its 20% benchmark weight, a breach of a −10 floor.