A Canadian mutual fund, mandated to invest primarily in Canadian large-cap equities, has recently increased its exposure to small-cap technology stocks and international emerging markets. This change, if not reflected in the fund's stated objectives or disclosures, is a prime example of:

Question: A Canadian mutual fund, mandated to invest primarily in Canadian large-cap equities, has recently increased its exposure to small-cap technology stocks and international emerging markets. This change, if not reflected in the fund's stated objectives or disclosures, is a prime example of:

Answer options:

• Market timing strategy ✅ Style drift
• Active management
• Sector rotation

Correct answer: Style drift

Explanation: Style drift occurs when a portfolio manager deviates from the fund's stated investment style or mandate. Here, moving from Canadian large-cap to small-cap tech and emerging markets without reflecting this change in objectives is a clear instance of style drift.