Friday evening. Friend's smallcase up 9 pct YTD. Same 30 names two-week rebalanced up 14 pct YTD.
"Same screen. Same equal weight at start. Same broad universe. His brochure prints quarterly rebalance. Mine prints fortnightly. Five percentage point gap on the same starting list." The brochure column nobody compares is cadence. The fee column gets all the attention. The cadence column does the work, quietly, inside the gap between rebalance dates.
9.0pct YTD
Smallcase . quarterly rebalance
4 rebalances per year. 63 trading days between trims. Inside the gap, weights drift. Top runner balloons to ~ 8.6 pct. Laggards collapse below 2.
VS
14.0pct YTD
Systematic . two-week rebalance
26 rebalances per year. 10 trading days between trims. Same names. Top weight drift held to ~ 1.4 pp. The discipline kept selling what ran, buying what lagged.
Same universe. Two cadences. Five point gap on the same starting list. The latency between rebalance dates is where mean reversion lives. Card two has the cadence math. Card three has the rules.