Transaction Costs in Portfolio Rebalancing

Consider a newly established investment firm managing a portfolio with assets across various asset classes, including equities, fixed income, and alternative investments. As part of the portfolio management process, the firm aims to rebalance the portfolio quarterly to maintain the desired asset allocation. The firm is concerned about the transaction costs associated with rebalancing, as these costs can significantly impact overall portfolio performance.

Discuss the factors that contribute to transaction costs in the context of trading and rebalancing a portfolio. Additionally, evaluate techniques that can be implemented to minimize these costs while achieving the intended portfolio objectives. Use examples to illustrate your points.