GF570 Unit 9 Rebalancing Cost Memo for a Foundation Example

Course	GF570 Portfolio Management
Unit	Unit 9
Paper type	Rebalancing and cost memo
Length	About 750 words, 5 pages double-spaced
Format	APA 7 student paper
School	Purdue University Global
Program	MS in Finance
Updated	October 2026

Free sample paper for GF570 Unit 9

Costs Before the Recommendation: A Unit 9 Rebalancing and Cost Memo for a Foundation Over Its Band

[Student Name]

Purdue University Global

GF570: Portfolio Management

Unit 9 Rebalancing and Cost Memo

[Instructor Name]

[Date]

The foundation and every figure are composite and illustrative; the statute, article and publication cited are real.

What this part is doingStating the drift and promising costs first in the lead tells the committee how the memo is ordered.

Memorandum

To: Investment Committee From: Investment Consultant Date: January 20, 2027 Re: U.S. equity above its policy range

The Situation

After a strong year for U.S. stocks, the fund stands at about $194 million and U.S. equity is 38.4 percent of assets, above the policy range of 27 to 37 percent. The acquirer shares, now sellable, make up about 13 percent of the fund on their own. The drift has raised the portfolio's expected volatility from 11.95 percent at target weights to about 12.26 percent. The policy requires rebalancing halfway back to target when a range is breached.

Option 1: Full Rebalance to 32 Percent

Trades. Sell about $12.42 million of U.S. equity and spread it across the underweight classes, about $24.1 million of total turnover counting both sides.

Trading cost. About 5.5 basis points of turnover, roughly $13,200.

Excise tax. Private foundations pay 1.39 percent on net investment income, including realized gains (Excise Tax Based on Investment Income, 26 U.S.C. § 4940, 2018). Selling the highest-cost tax lots realizes about $2.2 million of gains and $31,100 of tax; selling the lowest-cost lots, about $5.2 million of gains and $72,500 of tax.

Total. About $44,300 to $85,700.

Option 2: Halfway Back to 35.2 Percent, as the Policy Requires

Trades. Sell about $6.21 million of U.S. equity, about $12.0 million of turnover.

Costs. Trading about $6,600; excise tax on about $1.4 million of gains from the highest-cost lots, about $19,500. Total about $26,100.

Result. U.S. equity returns inside its range, and expected volatility falls to about 12.10 percent.

Option 3: Rebalance Through Cash Flows Only

Trades. Fund the year's $10.1 million of grants and expenses entirely from U.S. equity sales, which would happen anyway, and direct dividends and interest to the underweight classes.

Costs. Almost none beyond what grant funding already requires.

Result. U.S. equity would return to about 35 percent only by year end, leaving the fund outside its range for most of the year, in breach of the policy.

The cheapest option breaks the policy and the most complete one costs between about 1.7 and 3.3 times as much as the required one, so the halfway rebalance is the right choice not because it is a compromise but because it meets the rule the trustees adopted at the lowest cost that does so.

What this part is doingThe highlighted sentence links the recommendation to both cost and policy, the reasoning graders look for in a rebalancing memo.

Why Rebalance at All

Drift is not free. Holding 38.4 percent in U.S. equity adds about 0.3 points of expected volatility and concentrates the fund in the market that has just risen most. Research on rebalancing finds that disciplined rebalancing keeps a portfolio's risk close to its policy and can add modestly to returns when markets revert, though the benefit depends on costs (Arnott & Lovell, 1993).

Tax Lot Selection

The memo assumes the highest-cost lots are sold first, which minimizes realized gains and excise tax. The acquirer shares were received at a low cost basis when the business was sold, so selling them first would realize the largest gains. The sale plan in the investment policy schedules those shares over four quarters; the first tranche can be part of this rebalance if the committee prefers to reduce concentration now despite the higher tax.

A Policy Question Left for Another Day

This memo does not revisit the policy ranges or the target allocation. If the committee believes the 27 to 37 percent range is too narrow for a fund holding a large single stock, that is a policy question for the trustees, separate from this year's rebalancing.

Timing

Trades would be executed over three days to limit market impact, beginning the week after the committee approves. The core-plus and inflation-linked managers have been told to expect inflows.

Effect on Grants

None of the options changes the year's grant budget, which is set by the twelve-quarter average of assets and is funded from cash and sales the fund makes in any case.

Recommendation

Rebalance halfway to 35.2 percent, selling the highest-cost lots outside the acquirer block, at an estimated cost of about $26,100. Begin the first quarterly tranche of the acquirer sale next quarter as scheduled, and use grant funding throughout the year to move further toward target (Maginn et al., 2007).

What this part is doingEnding with a cost figure attached to the recommendation shows the memo kept its promise to price before advising.

References

Arnott, R. D., & Lovell, R. M. (1993). Rebalancing: Why? When? How often? The Journal of Investing, 2(1), 5-10. https://doi.org/10.3905/joi.2.1.5

Excise Tax Based on Investment Income, 26 U.S.C. § 4940 (2018).

Maginn, J. L., Tuttle, D. L., Pinto, J. E., & McLeavey, D. W. (2007). Managing investment portfolios: A dynamic process (3rd ed.). Wiley.

What the GF570 Unit 9 assignment asks for

The ninth GF570 unit asks for a memo recommending how to respond to portfolio drift, with costs shown before the recommendation. Describe the drift, the policy range breached and what the policy requires. For each option, state the trades, the turnover, trading costs and any tax on realized gains, using different tax lot choices where relevant, and the resulting risk. Include at least one low-cost option that relies on cash flows, and say whether it complies with the policy. Explain why rebalancing matters for this investor, with research support. Address special holdings that affect the choice, such as low-basis stock. Recommend one option with its cost and timing. Write in memo format for an investment committee. Cite the relevant tax rule and research on rebalancing in APA 7.

How the GF 570 Unit 9 example is put together

A situation paragraph opens the sample's memo, giving the fund's size, the 38.4 percent weight, the newly sellable acquirer shares and the rise in expected volatility. Three options follow, each with trades, costs and results. The full rebalance shows how tax lot choice moves the excise tax from about $31,100 to $72,500, citing the federal statute. The halfway option meets the policy at about $26,100. The cash-flow option is shown to breach the policy. The highlighted sentence explains why the halfway option is right on both cost and policy. A section on why to rebalance cites Arnott and Lovell, a tax lot section discusses the low-basis acquirer shares, and short notes on policy questions, timing and grants precede a recommendation citing Maginn and colleagues.

Where the points sit in the GF570 Unit 9 rubric

GF570 rebalancing memos are graded on whether costs are computed completely and placed before the recommendation. Graders check turnover, trading costs and tax on realized gains for each option, and reward showing how tax lot selection changes the result. The analytical share goes to weighing cost against both risk and policy compliance, since the cheapest option may break the rules. Attention to special holdings, such as low-basis shares, shows judgment. Instructors in the MS in Finance program value a clear recommendation with its price and timing. Memo format, research support on rebalancing and APA 7 references to the tax rule complete the grade.

Common GF570 Unit 9 mistakes, and how to avoid them

Many GF570 Unit 9 memos recommend a full rebalance without pricing it, or price trading costs but forget taxes on realized gains. Others ignore tax lot choice, which can more than double the tax. A cash-flow option is often presented as costless without checking whether it leaves the portfolio in breach of policy. Risk effects of the drift are not quantified. Low-basis holdings are treated like any other. The recommendation comes before the costs. For any drift your case describes, keep the order: situation and policy, options with full costs, risk effects, compliance, special holdings and a priced recommendation.

Get a GF570 Unit 9 example written to your instructions

Current weights, targets, bands and any cost or tax assumptions from your GF570 Unit 9 case, with the rubric, are what the memo needs; a taxable client works as well, with its own rates. Each option is priced before any advice is given. The first custom sample is unbilled, and turnaround runs around 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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GF570 Unit 9 questions, answered

Does a foundation pay tax on realized gains?

A private foundation generally pays an excise tax of 1.39 percent on its net investment income, which includes net capital gains, so realized gains carry a small but real cost. The sample prices that tax for each option. Public charities are treated differently, and a taxable client faces ordinary capital gains rates, so the custom memo applies the rules for whichever investor your case describes.

Where can I find a free GF570 Unit 9 sample paper?

This page holds a complete GF570 Unit 9 rebalancing and cost memo for a foundation over its U.S. equity range, pricing three options with trading costs and excise tax, with APA 7 references.

Why does tax lot choice matter so much?

Selling the highest-cost lots realizes about $2.2 million of gains, while selling the lowest-cost lots realizes about $5.2 million. At a 1.39 percent excise tax, that changes the tax from about $31,100 to $72,500.

Why not rebalance through grant payments alone?

It costs almost nothing, but it would leave U.S. equity above its policy range for most of the year, which breaches the rule the trustees adopted.

Should the acquirer shares be sold in this rebalance?

They carry the lowest cost basis, so selling them first realizes the largest gains and tax. The memo keeps them on their separate four-quarter sale plan unless the committee wants to cut concentration faster.