Section 8 of 12

Investment policy statement (IPS) section guide: rebalancing policy

The rebalancing section says when the portfolio is brought back towards its targets, and how. Calendar rebalancing happens on set dates; range-based rebalancing happens when a class leaves its band. The trigger can be monitored as a rule. The trade cannot, because it is a decision. The policy should therefore give that decision a deadline and an owner.

What this section is for

To set how often weights are reviewed, what triggers a rebalance, the method and the deadline. It also records when a rebalance may be deferred, and who approves the deferral.

What to write

State the trigger first. A calendar rule rebalances quarterly or annually, whatever the drift. A range rule rebalances when a class crosses its minimum or maximum. Many policies combine them: review each quarter, and act only outside the range. The four US foundation policies we read use range triggers, and a household sample uses a 5% drift band.

Then state the method and the deadline. Say whether cash flows are used first, and whether a rebalance returns to the target or only to the edge of the range. Say how fast it must happen. Record when deferral is allowed, such as for tax, illiquidity or a denominator effect on private assets, and who approves it.

The trigger is a rule; the trade is not

An allocation range rule shows when a class leaves its band, and warning bounds inside the range show drift early. What follows is a decision: the manager trades, or the committee approves a temporary deviation.

Give the decision a clock. In Acclimetry, a rule version can carry a grace period in days. The result is a breach from the first observation and the case opens at once, but its clocks start when the grace ends. A deviation the committee approves is a time-bound waiver, which never changes the result. See rebalance when an asset class leaves its range.

Sample clauses

How each clause becomes testable

The clauseRule templateNote
When an asset class moves outside its permitted range, the manager will restore it to within the range within 30 days.allocation_rangeThe band is the rule, and the 30 days is a grace period on the rule version. The case opens at once; its clocks start when the grace ends.
Drift to within 2 percentage points of a range limit is reported to the committee at its next meeting.allocation_rangeWarning bounds 2 points inside the hard bounds. A warning result is the reporting trigger.
Actual weights are compared with the strategic targets at least quarterly.manual_obligationA quarterly review attested by the committee. Automated monitoring is its evidence, not a substitute for it.

Questions

Should a rebalance go back to the target or to the edge of the range?

Either works if the policy says which. Returning to the edge trades less; returning to the target resets drift fully.

Is an asset class outside its range a breach before the deadline?

The result shows a breach from the first observation, but the policy can give the manager a stated period to correct it before escalation.

Sources

Updated: 14 October 2026Reviewed by: Muaz Notiar (14 October 2026)Acclimetry · Foreranger Ltd