1. Rebalancing – What works in Volatile Markets
Rebalancing – What works in Volatile Markets? December 3, Alan Bergin, CFA Larry Thompson & Associates

2. Assumptions
Portfolio with 60% in MSCI World and 40% in the Barclay’s Aggregate
One portfolio is rebalanced annually
Other portfolio is not rebalanced at all

3. Does Rebalancing work?
After almost 35 years, rebalanced portfolio worth more

4. Cumulative Market Value Difference (Rebalanced minus non-rebalanced)
Rebalancing is not always the best solution

5. Asset Allocation shifts in non-rebalanced portfolio

6. What About 2007-2009 Rebalanced portfolio worth more
It looked much worse through March

7. Cumulative Market Value Difference (Rebalanced minus non-rebalanced)
If not for strong 2009 recovery, rebalanced portfolios would be far behind

8. Asset Allocation shifts in non-rebalanced portfolio

9. Conclusion Rebalancing appears to work over long time periods
Over short periods, it has mixed results
In volatile markets, review asset allocation strategy before rebalancing
Issues to consider:
Have a rebalancing plan – do not market time
Rebalancing frequency
Range based or date based?
What is the cost of the rebalancing?
Range based rebalancing appears to offer best trade-off in costs and potential to capture market movements