Your client's strategic asset allocation is 50% Canadian Equity, 30% US Equity, 20% Fixed Income. Their current portfolio weighs 45% Canadian Equity, 35% US Equity, 20% Fixed Income. If their rebalancing corridor for equities is ±7.5% and for fixed income is ±5%, what is the appropriate rebalancing action?

Question: Your client's strategic asset allocation is 50% Canadian Equity, 30% US Equity, 20% Fixed Income. Their current portfolio weighs 45% Canadian Equity, 35% US Equity, 20% Fixed Income. If their rebalancing corridor for equities is ±7.5% and for fixed income is ±5%, what is the appropriate rebalancing action?

Answer options: ✅ Sell US Equity to buy Canadian Equity.

• Sell Canadian Equity to buy US Equity.
• No rebalancing is needed for any asset class.
• Sell Fixed Income to buy US Equity.

Correct answer: Sell US Equity to buy Canadian Equity.

Explanation: Canadian Equity: Actual 45%, Target 50%. Deviation -5%. Within ±7.5% corridor. US Equity: Actual 35%, Target 30%. Deviation +5%. Within ±7.5% corridor. Fixed Income: Actual 20%, Target 20%. Deviation 0%. Within ±5% corridor. All asset classes are within their respective rebalancing corridors, so no rebalancing is strictly required based on these triggers.