Portfolio Rebalancing vs. Portfolio Re-optimization

Portfolio rebalancing can help keep your portfolio strategy on target and can assist with performance. New software tools will help you with the operational execution of practice-wide rebalancing. So, why does portfolio rebalancing fall short when compared to re-optimization?

• Little in life is more dynamic than the financial markets. Yet rebalancing keeps rebalancing back to the same old asset allocation. New information is better than old information. Re-optimization lets you take maximum advantage.
• Re-optimization allows greater diversification: diversification is a moving target, re-optimization is able to more fully, maximize the portfolio diversification, so you’re not leaving performance on the table.
• Sometimes more is less. One of the crucial insights of portfolio optimization is that it tells you what not to invest in. Optimization always provides the best combination of risk, return and diversification or whatever your investors need for their portfolio objectives.
• Re-optimization provides a more efficient capture of other investor’s behavioral fallibilities. Their loss is your gain when you have the right systematically engineered proven strategies.