---
title: "Rebalancing | Altss Glossary"
description: "Rebalancing is adjusting portfolio holdings to bring exposures back in line with target allocations or risk limits."
canonical: "https://altss.com/glossary/rebalancing"
---

Portfolio Construction

# Rebalancing

Publisher: Altss LLCPublished 2025-12-31Content modified 2026-01-06

Rebalancing is adjusting portfolio holdings to bring exposures back in line with target allocations or risk limits.

**Allocator relevance:** **Maintains discipline—controls drift and ensures portfolios stay aligned with mandate, risk budget, and liquidity constraints.**

### Expanded Definition

As markets move and capital is called or distributed, portfolios drift away from targets. Rebalancing can be rule-based (thresholds, time-based) or discretionary. In portfolios with illiquid assets, rebalancing often happens primarily through pacing and new commitments rather than selling positions, which makes planning critical.

Rebalancing is a risk management tool, not just a performance tactic.

### How It Works in Practice

Allocators monitor allocation bands, concentration limits, and factor exposures, then buy/sell or adjust commitment pacing to restore targets. Liquidity sleeves often fund rebalancing actions during volatility.

### Decision Authority and Governance

Governance defines rebalancing triggers, who can execute, and how exceptions are handled. Clear rules reduce emotional decision-making in stressed markets.

### Common Misconceptions

- Rebalancing is market timing.

- Rebalancing is only for public markets.

- Illiquid portfolios cannot rebalance (they rebalance via pacing).

### Key Takeaways

- Rebalancing enforces allocation discipline.

- In private markets, pacing is the main rebalancing lever.

- Governance and rules prevent reactive mistakes.

## Related terms

[Asset Allocation](https://altss.com/glossary/asset-allocation)[Secondaries](https://altss.com/glossary/secondaries)[Venture Portfolio Construction](https://altss.com/glossary/venture-portfolio-construction)[Liquidity Sleeve](https://altss.com/glossary/liquidity-sleeve)

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