A Minimum Core Cash After Rebalance (MCCAR) value indicates the amount of cash that you want to remain in the account following a rebalance. You can request MCCAR regardless of whether the assigned model has a cash component or not. PM&R adjusts the targets and tolerance settings of all model components downward to accommodate the requested MCCAR. Doing so ensures that cash is maintained and all components remain at their defined targets once MCCAR is "removed" from the account's net worth.
Household Rebalance and MCCAR
Unlike a Standard rebalance where MCCAR applies to each account individually, in a Household rebalance, MCCAR applies to the entire household as a whole. For example:
In a Standard rebalance, a requested MCCAR of 5% for a single account with a market value of $80,000 leaves a cash after rebalance amount of $4,000 (80,000 x 5% = 4,000).
In a Household rebalance, a requested MCCAR of 5% for a household with 3 accounts each with a market value of $80,000 (for a combined value of $240,000) leaves a cash after rebalance amount of $12,000 (240,000 x 5% = 12,000). This amount may be held in any one of the 3 accounts or a combined balance of $12,000 across the 3 accounts.
The MCCAR process varies based on whether the model contains a cash component such as FCASH or QIWSQ.
Note
The following examples apply just to Standard rebalances. These examples are for illustrative purposes only and do not necessarily reflect current holdings invested in by Fidelity. References to specific company stocks should not be construed as recommendations or investment advice.
- Model Without Cash Component
- Model With Cash Component
The specifics for this Standard rebalance are shown below. Notice that the model lacks a cash component. By requesting MCCAR, the rebalance will adjust the model targets and add the cash component.
Rebalance objective = Target
Account net worth = $1,000,000.00
MCCAR target = 30%
Account holdings:
| Symbol | Market Value | Dollar Value |
|---|---|---|
| FBALX | 20.000% | $200,000.00 |
| FEMKX | 30.000% | $300,000.00 |
| AMZN | 10.000% | $100,000.00 |
| F | 30.000% | $300,000.00 |
| BAC | 10.000% | $100,000.00 |
| Total | 100% | $1,000,000.00 |
Model components:
| Symbol | Target % | Minimum % | Maximum % |
|---|---|---|---|
| FBALX | 25.000% | 22.500% | 27.500% |
| FEMKX | 25.000% | 22.500% | 27.500% |
| AMZN | 10.000% | 9.000% | 11.000% |
| F | 30.000% | 27.000% | 33.000% |
| BAC | 10.000% | 9.000% | 11.000% |
| Total | 100% |
System adjusts each model target individually by the MCCAR target:
Target % x (1 - 30%)
System adjusts each model minimum and maximum threshold by the same MCCAR target:
Min % or Max % x (1 - 30%)
RESULT
The adjusted model now includes the cash component, FCASH:
| Symbol | Target % | Minimum % | Maximum % |
|---|---|---|---|
| FBALX | 17.500% | 15.750% | 19.250% |
| FEMKX | 17.500% | 15.750% | 19.250% |
| AMZN | 7.000% | 6.300% | 7.700% |
| F | 21.000% | 18.900% | 23.100% |
| BAC | 7.000% | 6.300% | 7.700% |
| FCASH | 30.000% | 27.000% | 33.000% |
| Total | 100% |
Note
Where MCCAR is a dollar value, the system calculates the percent of market value of the MCCAR dollar amount to get the MCCAR percentage, and then adjust targets accordingly.
In this example, the model already holds the cash component, FCASH.
Rebalance objective = Target
Account net worth = $1,000,000.00
MCCAR target = 30%
Cash component target = 10% (FCASH)
Account holdings:
| Symbol | Market Value | Dollar Value |
|---|---|---|
| FBALX | 20.000% | $200,000.00 |
| FEMKX | 30.000% | $300,000.00 |
| AMZN | 10.000% | $100,000.00 |
| F | 30.000% | $300,000.00 |
| BAC | 10.000% | $100,000.00 |
| Total | 100% | $1,000,000.00 |
Model components:
| Symbol | Target % | Minimum % | Maximum % |
|---|---|---|---|
| FBALX | 25.000% | 22.500% | 27.500% |
| FEMKX | 20.000% | 18.000% | 22.000% |
| AMZN | 10.000% | 9.000% | 11.000% |
| F | 25.000% | 22.500% | 27.500% |
| BAC | 10.000% | 9.000% | 11.000% |
| FCASH | 10.000% | 9.000% | 11.000% |
| Total | 100% |
When a cash component already exists in the model and MCCAR is requested, the rebalance process uses the greater of the two values. In this example, since the target of the cash component in the model is 10% and MCCAR target is 30%, the required cash after rebalance is 30%.
System adjusts each model component using the following formula:
Target x {(1-MCCAR)/(1-Model Cash Target)}
For example, FBALX Target = 25% x {(1-0.3)/(1-0.1)} = 19.444%
RESULT
The adjusted model is shown here:
| Symbol | Target % | Minimum % | Maximum % |
|---|---|---|---|
| FBALX | 19.444% | 17.500% | 21.389% |
| FEMKX | 15.556% | 14.000% | 17.111% |
| AMZN | 7.778% | 7.000% | 8.556% |
| F | 19.444% | 17.500% | 21.389% |
| BAC | 7.778% | 7.000% | 8.556% |
| FCASH | 30.000% | 30.000% | 30.000% |
| Total | 100% |
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