Education

Position Adjustment

Position Adjustment refers to the process of adjusting the composition of a portfolio by buying or selling assets as necessary to align it with the investor's investment objectives and market conditions.

Inflows and Redemptions refer to cash flowing into or out of the portfolio, respectively. Inflows occur when an investor adds cash to the portfolio, and redemptions occur when an investor withdraws cash from the portfolio. Inflows and redemptions can have a significant impact on the portfolio's composition and size.

Position Adjustment relative to Inflows and Redemptions, means that the portfolio manager will make adjustments to the portfolio as necessary to ensure that it remains aligned with the investor's investment objectives and target portfolio size. 

• For example, if an investor adds cash to the portfolio through an inflow, the portfolio manager would use that cash to buy additional assets to align the portfolio with the investor's objectives and target portfolio size. 

• Similarly, if an investor withdraws cash from the portfolio through a redemption, the portfolio manager would sell assets to align the portfolio with the investor's objectives and target portfolio size.

Another important aspect of position adjustment is Market Price Impact, which refers to the impact of market conditions on the value of the portfolio's assets. Market conditions can change rapidly, and these changes can have a significant impact on the portfolio's value. 

• For example, if the stock market experiences a significant downturn, the value of the portfolio's stocks would decrease. To mitigate the impact of market price impact, the portfolio manager would adjust the portfolio by selling assets that have decreased in value and buying assets that have increased in value, in order to align the portfolio.