What is the strategy called when a portfolio manager moves client funds from one industry to another during defined periods?

The strategy known as sector rotation refers to the practice of a portfolio manager shifting client investments from one industry or sector to another based on anticipated performance. This strategy is grounded in the understanding that different sectors of the economy perform better at different stages of the business cycle. By moving funds into those sectors expected to outperform, the manager aims to enhance overall portfolio returns.

Sector rotation typically involves careful timing and analysis of economic indicators, market trends, and sector-specific news, thereby allowing managers to capitalize on anticipated shifts in sector performance. This proactive approach can lead to increased portfolio efficiency and effectiveness, as it seeks to optimize returns while managing risk in changing market conditions.

In contrast, dollar cost averaging is a strategy for reducing the impact of volatility by investing a fixed amount regularly, while asset rebalancing refers to adjusting the proportions of various assets in a portfolio back to a predetermined allocation. Portfolio rebalancing is similar but may not specifically focus on shifting between sectors as sector rotation does.