Rebalancing
Rebalancing is the process of adjusting portfolio exposures back toward target allocations as markets move and positions drift.
Rebalancing
Rebalancing restores a portfolio to its strategic targets after market movements, cash flows, or valuation changes shift weights. It is a discipline used to control risk, prevent unintended concentration, and maintain alignment with investment policy. Allocator Context Institutional allocators often rebalance within defined bands, using systematic or committee-approved rules. In private markets, rebalancing is constrained by illiquidity; allocators may rebalance through pacing, secondary sales, or adjusting new commitments rather than selling existing positions. Decision Authority Rebalancing rules are usually set by IPS and overseen by CIO teams, with committee involvement when changes are large, involve illiquid exposures, or require exceptions. Why It Matters for Fundraising Rebalancing dynamics affect fundraising timing. Allocators may pause commitments not because they dislike a manager, but because exposure bands are breached due to market moves. Managers that understand this can time follow-ups more effectively. Key Takeaways Maintains target exposures and risk posture Policy-driven in institutional portfolios Harder in private markets due to illiquidity Explains many “not now” fundraising outcomes