Style drift

What it means

A manager gradually moving away from the strategy the mandate describes.

The exam angle

Often invisible in returns until the market turns, because drifting toward whatever is working flatters performance while it lasts.

Where it appears in the syllabus

• Risk & Investment ManagementFRM Part II · exam weight 15% · Factor theory, risk budgeting, attribution, hedge funds, illiquid assets.
• Portfolio ConstructionCFA Level II · exam weight 10–15% · Active management, ETFs, multifactor models, market risk, backtesting.

Related terms

• Arbitrage pricing theoryA model deriving expected returns from exposures to multiple systematic factors, assuming no arbitrage rather than a…
• Factor investingBuilding portfolios around systematic return drivers — value, size, momentum, quality, low volatility — rather than…
• Multifactor modelA model explaining returns by exposure to several systematic factors rather than to the market alone.
• Hedge fund replicationReproducing hedge fund returns using liquid instruments and factor exposures, rather than by paying for the funds…
• Liquidity-adjusted VaRVaR extended to include the cost of closing the position — the bid–ask spread and the market impact of exiting at size.
• Marginal VaRThe change in portfolio VaR from a small increase in one position — the position’s contribution to total risk at the…