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Overview

Rebalancing keeps your vault aligned with strategy targets. This guide covers when and how to rebalance effectively.

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When to Rebalance

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Maturity Events

Most common trigger for fixed-rate vaults: 
Position A (30-day) matures:
├── Principal: $100,000
├── Interest: $800
├── Total: $100,800 now in cash

Decision: Redeploy to new position or adjust allocation?

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Drift Threshold

When allocation drifts from target: 
Target: 33% each in 30d, 60d, 90d

Current (after market moves):
├── 30-day: 40% (+7%)
├── 60-day: 28% (-5%)
├── 90-day: 27% (-6%)
├── Cash: 5%

Drift exceeds 5% threshold → Rebalance

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Rate Opportunities

When rates significantly improve: 
Current position: $200,000 at 7.5% (60 days remaining)
New market rate: 9.0% for 60 days

Potential improvement: +150bps
Consider: Exit current, enter new position

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Large Deposits/Withdrawals

New capital needs deployment: 
Vault AUM: $1,000,000
New deposit: $250,000 (+25%)

Deploy new capital according to strategy targets

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Rebalancing Process

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Step 1: Assess Current State

const currentAllocation = await vault.getAllocation();
console.log(currentAllocation);
// {
//   positions: [...],
//   cash: 50000,
//   totalValue: 1000000
// }

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Step 2: Calculate Target

const targetAllocation = {
  '30-day': 0.30,
  '60-day': 0.35,
  '90-day': 0.30,
  'cash': 0.05
};

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Step 3: Plan Trades

const rebalanceActions = calculateRebalance(
  currentAllocation,
  targetAllocation
);
// [
//   { action: 'reduce', position: '30-day', amount: 70000 },
//   { action: 'increase', position: '60-day', amount: 50000 },
//   { action: 'increase', position: '90-day', amount: 30000 }
// ]

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Step 4: Execute

await vault.rebalance(rebalanceActions);

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Rebalancing Strategies

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Calendar-Based

Fixed schedule regardless of drift:
FrequencyBest For
WeeklyActive strategies
MonthlyModerate strategies
At maturityPassive strategies

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Threshold-Based

Rebalance when drift exceeds threshold:
ThresholdRebalancing Frequency
2%Very frequent
5%Moderate
10%Infrequent

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Opportunistic

Rebalance when market conditions favor it:
  • Rates significantly higher/lower
  • Liquidity unusually good
  • New opportunities emerge

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Execution Best Practices

Gradual Moves

Large rebalances over multiple days to reduce market impact

Limit Orders

Use limit orders for better execution

Document Rationale

Record why you’re rebalancing

Consider Costs

Factor in any costs (opportunity, gas if applicable)

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Rebalancing Example

Starting State:
├── 30-day USDC @ 7.5%: $300,000 (30%)
├── 60-day USDC @ 8.0%: $350,000 (35%)
├── 90-day USDC @ 8.2%: $300,000 (30%)
├── Cash: $50,000 (5%)
Total: $1,000,000

Event: 30-day positions mature → $306,000 cash now

New State:
├── Cash: $356,000 (35.6%)
├── 60-day (now 30-day): $350,000 (35%)
├── 90-day (now 60-day): $300,000 (30%)

Rebalance Plan:
1. Deploy $206,000 to new 90-day positions
2. Keep $100,000 as new 30-day maturity ladder
3. Maintain $50,000 cash buffer

Execution:
├── Create lend order: $206,000 @ 8.3% for 90 days
├── Create lend order: $100,000 @ 7.8% for 90 days
└── Target allocation restored

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Costs of Rebalancing

Cost TypeImpactMitigation
Opportunity costExit position early = forfeit yieldWait for maturity when possible
Spread costMarket orders have spreadUse limit orders
Time costYour time to executeAutomate when possible

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Automation

For approved curators, automation tools: 
// Set auto-rebalance rules
await vault.setAutoRebalance({
  enabled: true,
  driftThreshold: 0.05, // 5%
  rebalanceFrequency: 'weekly',
  preferredTime: '00:00 UTC',
  maxSlippage: 0.005 // 0.5%
});

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FAQs

Depends on strategy. Fixed-rate vaults often rebalance at maturities. Active strategies may rebalance weekly.
Yes. Excessive rebalancing can reduce returns through costs and missed yield.
Adjust rates or split across maturities. Partial deployment is okay.