The maximum asset allocation is similar to that of the minimum asset allocation. This prevents conditions where using a market cap weighted index results in a single asset holding too much of the weighting in the portfolio. Continuing from the last example, we can see that BTC is still holding almost 50% of the value in the portfolio. If we wanted to reduce this amount to 20% for example, the resulting portfolio would look as follows:

  • BTC - 20%
  • ETH - 20%
  • XRP - 19.51%
  • BCH - 8.14%
  • LTC - 7.35%
  • BSV - 5%
  • XLM - 5%
  • TRX - 5%
  • ADA - 5%
  • XMR - 5%

We see that placing a maximum asset allocation on our index has reduced our BTC weighting to 20%. In doing so, we redistributed some of the weighting to other assets in the index. ETH for example increased in weighting enough to also exceed the maximum asset allocation, resulting in it also capping at 20%. The remaining amounts left over are distributed to the remaining assets based on market cap.

Amun is an example of an index fund which uses a minimum and maximum allocation percentage. You can read more about their methodology on their site here:

Amun Crypto Basket Index

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