Custom Allocation: What is the Portfolio Drift Tolerance?

For asset allocation targets, the Portfolio Drift is a measure of the combined difference between actual and target allocations across all classes. The Portfolio Drift Tolerance determines when we send an alert for this measure.

Portfolio Drift helps you to examine a client or portfolio allocation before an individual class is out of tolerance. Basically, portfolio drift increases as each individual class drifts away from their target.

In the example below, if each asset class had a tolerance of 5%, no alerts would be triggered for any of the asset classes. This is because the current allocation for each asset class is within 5% of its target. However, if the Portfolio Drift Tolerance was set at 5%, it would trigger an alert because the Portfolio Drift is 6%. The combined difference across all asset classes is greater than the Portfolio Drift Tolerance.