Rebalancing the Simon Fraser University’s Academic Pension Plan’s Balanced Fund: A Case Study

The purpose of the paper is to investigate the rebalancing strategy for Simon Fraser University’s Academic Pension Plan’s Balanced Fund. First, we examine performances of a “no rebalancing” fund and rebalanced funds with different rebalancing frequencies and thresholds based on the historic data. The results show that the rebalancing frequency and thresholds do not significantly affect the performance of the portfolio. Additionally, the rebalanced portfolios significantly outperform the “no rebalancing” portfolio. More important, we examine whether the conclusion from one historic simulation holds in 10,000 Monte Carlo simulations based on historic means, variances and co-variances and two sets of hypothetical means. The results indicate that the higher rebalancing frequency and smaller threshold will reduce cumulative wealth of rebalanced portfolios and reduce risk.