Style Drift


DEFINITION of 'Style Drift'

The divergence of a mutual fund from its stated investment style or objective. Style drift occurs as a result of intentional portfolio investing decisions by management, a change of the fund's management or, in the case of stocks, a company's growth.


Generally, a portfolio manager's ability and commitment to managing a fund's assets according to its stated investment style over the course of several years is a positive investment quality. For obvious reasons, consistency in this particular area is preferable to style drift. Managers chasing performance have been known to resort to using different strategies, which are often counterproductive and can change the risk-return profile of the fund.

Nevertheless, fund investors need to exercise some flexibility in making judgments of a fund's investment style stability. Some funds allow for a "go-anywhere" style, which means that the manager will do just that. Also, it is not unusual for small cap and mid cap companies to grow in size, which means that a fund may shift capitalization categories accordingly. Circumstances can justify giving the fund manager some leeway. As such, a history of consistent, above average total returns should override any concerns about style drift.

  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Focused Fund

    A mutual fund which rather than holding a diversified mix of ...
  3. Style Box

    Created by Morningstar, a style box is designed to visually represent ...
  4. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
  6. Style

    The investment approach or objective that a fund manager uses ...
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