MinTrackingErrorObjective selects portfolio positions that minimize deviation from target weights, without accounting for tax consequences. It is useful when rebalancing should prioritize target alignment. section 13.3.2
Initialize it with target weights and a sigma matrix. During optimization, the implementation converts positions to portfolio weights, selects the target assets, computes weight differences, and minimizes their sigma-scaled squared magnitude.
Target allocation
For a portfolio targeting 60% VTI and 40% AGG, the objective evaluates candidate positions after dividing them by total investment value, then favors the allocation with the smallest risk-adjusted tracking deviation.
