Definition:
Style drift occurs when a mutual fund's holdings "drift" from one asset class (or investment style) to another.
Helpful Hint: Investors should continue to research and evaluate their mutual fund holdings to detect style drift. This style drift may cause investors to unwittingly have too much exposure in one area of the market.
Result of Style Drift: Style drift may result in an overweighting in one investment class and underweighting in another, therefore changing the risk/reward characteristics of a portfolio.
Examples:
If an investor bought a particular mutual fund to fill the domestic small-cap stock portion of their portfolio, and down the road it is discovered that the fund has developed a substantial weighting toward another investment style, such as domestic large cap equities, then style drift has occurred.