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Rebalance portfolios against a strategy

Strategy rebalancing makes sure your portfolio follows allocation shares defined in the strategy. If an asset type is below or above the target, the system suggests buys or sells to increase the portfolio positions proportionally. If an asset type is missing from the portfolio (for example, the strategy requires 10% Finnish stocks but the portfolio doesn't have any), the system suggests equally-sized trade orders for each security in the missing asset type from your buy list.

Strategy rebalancing doesn't adjust holdings within the asset type. For example, if Finnish holdings in the portfolio are represented by one security, rebalancing considers this sufficient. It doesn't suggest sells to buy other Finnish stocks from the buy list.

Strategy rebalancing works only for equity portfolios. It should not be used with funds and ETFs that are allocated to several asset types (for example, a fund security can be allocated as 70% US and 30% Canada).

To use a strategy for rebalancing portfolios, follow the steps:

Step 1 – Create a buy list

To start with strategy rebalancing, you need to create a buy list. Allocate securities that will be involved in this process, include them in a security group and link this group to the investment portfolios.

  1. Create a security group with the securities that will be available for buys. Go to Groups → Security groups and create a static or dynamic group. To learn more about security groups, see Groups view.

  2. Link this security group to the portfolios you rebalance in the Portfolio window, Security groups tab. For more information about linking, see Security groups.

  3. Make sure that securities in the security group are allocated with the asset types (the same ones as your strategy uses). To allocate securities, go to Security window , Allocation tab.

Now you set up securities that are included in rebalancing against a strategy.

Step 2 – Rebalance investment portfolios to create trade orders

To rebalance investment portfolios against the strategy and create trade orders:

  1. Depending on your business case, choose one of the options to rebalance investment portfolios:

    • Rebalance a single portfolio. Select the investment portfolio on the Overview. Right-click it on the right and choose Rebalancing. Select "Strategy" in the Rebalance against field.

    • Rebalance selected portfolios against the strategies linked to them. Search the investment portfolios on the Portfolios view, click Rebalance at the bottom. Select "Strategy" in the Rebalance against field.

  2. Define rebalancing parameters. Choose the asset group the strategy is based on, set the rebalancing logic, and trade order generation options. For more information about the fields, see Rebalance window. Check the error notifications by clicking rebalance_error.png above table. If any data (strategy or securities in the security groups linked to the portfolios), the system informs you about this.

  3. If needed, adjust the target security shares in the table. Once you defined all parameters, click Rebalance.

  4. View the trade orders suggested by the system.

    Use the filters at the top to adjust the list of trade orders. Once you are satisfied with the list, click Save. Note that only visible trade orders are saved. To save all suggested trade orders, clear all filters before saving.

Step 3 - Execute the trade orders to create transactions

To execute the trade orders:

  1. Search for the created trade orders in the Trade orders view and set their status to "Executable". Send the executable trade orders forward to buy and sell securities to the investment portfolios.

  2. Once the trades are implemented in the market, execute trade orders in FA with the realized values to create transactions to the investment portfolios.

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