How does rebalancing work?

Each quarter, shortly after the 13-F filing release date, Titan users' portfolios are rebalanced to a few new stocks based on hedge funds' highest-conviction positions (per the Titan algorithm) as well as to achieve equal-weighting across the portfolio.

New portfolio positions

Based on Titan's algorithms, the Titan portfolio is updated each quarter upon the release of 13-F filings for hedge funds. Typically a few new stocks enter the portfolio, replacing a few existing Titan stocks. This is reflective of hedge funds' highest conviction positions at the prior quarter's end.

Within a few days of 13-F filing releases, the Titan portfolio is updated by selling the stocks which have left the portfolio (per the Titan algorithm) and using the proceeds to buy the new stocks which have entered the portfolio (again, per the Titan algorithm). The proceeds are allocated to the new stocks in proportions such that the resulting portfolio is equal-weighted, as described below.

Equal weighting

The Titan flagship product consists of a 20-stock portfolio, equal-weighted across those stocks. Throughout each quarter, the constituent stocks can significantly increase/decrease in value, resulting in unequal weightings in the overall Titan portfolio.

To normalize for large quarterly stock moves and maintain balanced portfolio weightings over time (without too much exposure to any given stock), Titan sells any stocks that are above equal-weight and re-allocates those funds to stocks that are under-weight. The result is an equally-weighted portfolio after each quarterly rebalance.

While there can be short-term tax implications for the stocks that are sold which have short-term capital gains, these tax consequences have historically been de minimis and more than offset by the benefits of re-weighting.

Did this answer your question?