Why can style drift be a problem?

Despite the potential benefits of investing in a fund that undergoes style drift, it is important to recognize the inherent risks involved. By allowing the fund manager to shift the investment strategy without considering the individual investor's goals and risk tolerance, investors risk losing control over their asset allocation.

Style drift occurs when a fund manager deviates from the fund's stated investment objectives and strategies. This can happen for various reasons, such as market conditions, the manager's personal beliefs, or pressure to perform.

The problem with style drift is that it can lead to significant changes in the fund's risk profile and performance characteristics. Investors who purchase a fund based on its stated investment objectives may find that the fund no longer aligns with their investment goals and risk tolerance.

Furthermore, the fund manager's focus on achieving the best returns for their fund may not necessarily align with the best interests of individual investors. This can result in conflicts of interest and a lack of transparency in the fund's investment decisions.

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