Andes Risk includes a feature that allows you to monitor whether client accounts and portfolios remain aligned with their desired risk and return objectives over time. To access this page in Andes Risk, open a household and navigate to the Target Asset Allocation section on the dashboard.
Asset allocation refers to how investments are distributed across different asset classes, such as stocks, bonds, and cash equivalents. For simplicity, these asset classes are grouped into broader categories.
Asset allocation drift happens when a household’s actual investment mix moves away from its target asset allocation. This can occur due to market movements, changes in investment performance, or portfolio rebalancing.
Account aggregation follows this order:
- Client accounts are aggregated first.
- If no client accounts are available, prospect accounts are aggregated.
- If neither client nor prospect accounts exist, proposal accounts are aggregated.
The Portfolio Accounts Overview shows all accounts used in the asset allocation calculation and can also be used to help troubleshoot any issues.
Defining Allocation Drift Tolerance Thresholds
Below is a brief overview of the drift thresholds:
Within Tolerance Drift – The allocation has deviated slightly from the target but remains within acceptable limits. This typically results from minor market fluctuations or normal changes in portfolio conditions.
Warning Drift – The deviation has exceeded predefined thresholds, signaling a potential issue or early signs of performance misalignment that may require attention.
Out of Tolerance Drift – The allocation has significantly deviated from the target levels and requires action to bring the portfolio back in line.
Monitoring asset allocation drift is essential to maintaining portfolio integrity and supporting long-term investment goals. By comparing actual allocations against target levels, investors can identify deviations early and take corrective action. If left unaddressed, asset allocation drift may result in unintended risk exposure or suboptimal performance over time.