Switch and Rebalance Process

This guide provides advisers and DFMs with a clear understanding of how Hubwise processes rebalances and model switches, including timing considerations and settlement alignment

Rebalancing a model portfolio on the Hubwise platform ensures that investments remain aligned with the intended asset allocation. This process calculates the required redemptions and invests portfolio back in line with its target allocation. The process becomes slightly more complex when a model portfolio update involves the removal or addition of an asset, requiring a complete sale of the removed asset before the full rebalance is executed and incorporating the new asset effectively.

This guide explains the rebalancing process and outlines various scenarios.  The process is the same whether a model portfolio is being rebalanced or investors are being ‘switched’ to a new revision of a model portfolio. More information on Model Portfolios and Rebalancing can be found here:

• Account Amendment – Portfolio Switch / Rebalance : Knowledge base
• DFM & Advised Model Management Functionality Guide : Knowledge base
• Floating or Drift Models : Knowledge base

A switch or rebalance will be one the triggers that resets buying power cash within each account. Please refer to the specific article for further information on Buying Power https://knowledgebase.hubwise.co.uk/support/solutions/articles/76000085882-guide-to-buying-power-on-ss-c-hubwise 

1. Calculation of Trades
   • There is an initial assessment of the portfolio's current asset allocation against the target allocation the model portfolio in each account.
   • Required redemptions and invests trades are calculated in monetary terms to realign the portfolio.
2. Placement of Trade 
   •  Redemption trades are placed first to generate the necessary cash.
   • Invest trades are then placed and scheduled to match the settlement date of the corresponding redemptions. 

1. Complete Sale of the Removed Asset
   • When a model portfolio update removes an asset, that asset must be fully sold before further rebalancing.
   • The exact proceeds from this sale are determined once the trade is priced.
2. Final Rebalancing Calculation and Execution
   • Once the proceeds from the complete sale are known (priced), the rebalance calculation is re-run.
   • The redemption and invest trades required to realign the portfolio are then adjusted to incorporate the new cash from the removed asset.

1. Integration of the New Asset into the Model Portfolio
   • The target allocation for the new investment is factored into the model update.
   • The required cash to allocate to the new asset is calculated as part of the rebalance process.
2. Execution of Invests
   • Following the redemptions to free up cash, a proportion of the available funds is allocated to purchasing the new asset.
3. Execution of Rebalancing Trades
   • Remaining redemptions and corresponding invests, including the new asset, are placed.

1. Complete Sale of the Removed Asset
   • The asset being removed is fully sold first to generate cash for the rebalancing process.
   • The exact proceeds from this sale are determined once the trade is executed.
2. Rebalance Calculation Incorporating the New Asset
   • Once the proceeds from the removed asset’s sale are available, the rebalance is recalculated.
   • The required redemptions of other assets and invests, including the new asset, are adjusted to align with the updated model allocation.
3. Execution of Rebalancing Trades
   • Remaining redemptions and corresponding invests, including the new asset, are placed with redemptions place first and then invests ensuring the settlement dates for all trades are aligned

• Trade Settlement Timing: The settlement dates of redemptions and invests will always be aligned.
• Hubwise-Specific Rules: The Hubwise platform has specific procedures for processing rebalances and switches, so users should be familiar with platform guidelines and requirements

Example 1 Rebalance

Asset Name                                  Settlement Period

Fund A                              T+3

Fund  B                                           T+3

Fund C                                            T+3

All the above funds have the same settlement period so where there is a rebalance only the value trades for sales and Invested will be calculated and all trades sent at the same time as they will then settle at the same time.

Example 2 Rebalance

Asset Name                                  Settlement Period

Fund A                              T+5

Fund  B                                           T+1

Fund C                                            T+1

In this example, the settlement periods are different.  If we assume that Fund A needs to have a sale placed and then that is to be invested into Funds B and C.Sale trades made from Fund A on Day 1

• Settlement will be on Day 6
• Invest trades will be made on Day 5 so that the settlement of the sale and Invest trades will settle on the same date.