A Canadian equity fund, historically focused on value stocks, has recently shown a significant increase in its allocation to growth stocks and technology companies, deviating from its stated investment mandate. This behaviour is best described as:

Question: A Canadian equity fund, historically focused on value stocks, has recently shown a significant increase in its allocation to growth stocks and technology companies, deviating from its stated investment mandate. This behaviour is best described as:

Answer options:

• Benchmark outperformance ✅ Style drift
• Active management
• Sector rotation

Correct answer: Style drift

Explanation: Style drift occurs when a fund manager deviates from their stated investment strategy or style, potentially exposing investors to unintended risks and altering the fund's risk-return profile. This example clearly shows a shift from value to growth.