Which of the following scenarios best illustrates 'style drift' in a Canadian mutual fund that claims to be a Canadian Dividend Growth fund?

Question: Which of the following scenarios best illustrates 'style drift' in a Canadian mutual fund that claims to be a Canadian Dividend Growth fund?

Answer options:

• The fund manager increases holdings in Canadian large-cap stocks over Canadian small-cap stocks. ✅ The fund manager begins investing a significant portion of the portfolio in U.S. technology stocks.
• The fund's equity exposure remains at 80%, while fixed income increases to 20%.
• The fund reduces its turnover rate to minimize trading costs and capital gains distributions.

Correct answer: The fund manager begins investing a significant portion of the portfolio in U.S. technology stocks.

Explanation: Style drift occurs when a fund deviates significantly from its stated investment style. Investing in U.S. technology stocks would be a clear departure for a fund explicitly focused on Canadian Dividend Growth.