Guideline 12. Dynamic investing

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As asset market values change over time, the investing institution is able to exploit variations in market valuations by investing differently than in the strategic asset allocation, while respecting the risk budget established in Guideline 7.

This process of dynamic investment (sometimes referred to as tactical investment) will be limited in time but the maintenance of such a position apart from the strategic asset allocation may subsist in the medium term.

Guideline code

INVEST_01500

Mechanism

The management or investment committee may exploit variations in market valuations by deliberately adjusting the asset allocation of the portfolio away from the strategic asset allocation.
According to the investment policies and procedures of the investing institution, the management or investment committee should, as required, seek approval of the board before deviating from the approved strategic allocation. The management or investment committee should carefully evaluate which investments will most efficiently exploit variations in market valuation.
Where the board, management or investment committee lacks sufficient resources, expertise or governance budget to make fully informed decisions about dynamic investing, the board, or the management with board authorization, should seek expert advice or appoint external professionals to carry out these functions.

Parent

C. Common Processes

Structure

The management or investment committee may seek to identify and exploit variations in market valuations according to the investment beliefs and governance budget of the investing institution.
The board will authorize, on the recommendation of the management or investment committee, the appropriate allocation ranges around a central weight for each asset class in the strategic asset allocation.

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