Assumes standard deviation as measure of risk. Does not take into account attitude to risk/capacity for loss. Uses historic data to predict expected returns. Excludes impact of costs and charges. Assumes portfolio uses passive funds/cannot factor Alpha.

Easy to calculate/uses widely available information. Takes account of systematic/market risk. Reflects fact most portfolios are diversified to remove unsystematic risk. Robust/trusted. Gives an expected return/benchmark.

Management fee/Annual Management Charge. Administration fees/secretarial/directors fees/insurance. Marketing. Audit/tax compliance fees. Registration/regulatory fees. Custody/depositary/trustee.

Misc Flashcards by Jonathan Lecomber

Purpose of ir sharpe etc (3)

Compare against benchmark
Assess risk adjusted returns
Outperformance, value alpha

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Reasons for outperformance (3)

Sector
Consistency manager
Skill manager

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Reasons for cash high (4)

Inflows
Failed deals
Redemptions
Recent disposal

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Effects of high cash (4)

Drag on performance
Protects in falling market
Dilutes yield
Buying opps

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Paif rules - 4

60% of income from property

60%of assets property

No corporate investor 10% more than nav

90% property income to shareholders within 12m TYE

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How is paif taxed

Tax free on property

Ct on shares/cash

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How are investors taxed on paif/reit

20% paid at source

Otherwise div/interest

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List of risks

Protection
Non systematic
Systematic
Sector risk:not diversified

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Define sequencing risk

Impact of volatility
On order and timing of withdrawals
On sustainsimg income
Greater in early years

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5 reasons to rebalance

Change objectives
Market conditions
Clients asks
Underperformance
Value of investment returned

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Index linked gilts price go down when?

Inflation lower than expected
Deflation
IR faster than inflation

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How to calculate IL gilt rise 4

Rpi 3 months before
Divided by rpi at issue
X coupon and capital
Divide by 2

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IL risks and drawbacks

Price volatility before maturity -ir
No fscs held directly
Possible capital loss
Deflation risk
Reinvestment risk at maturity

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Benefits of IL

Retain buying power
No default risk
Tradable
Income stream

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Break even calc

Conventional minus IL

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Reasons 4 and effects 3 of holding cash

inflows
to cover redemptions
dividend payments
recent disposal

Drag on performance
reduce volatility
take advantage of opportunities

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liquidity crisis open ended and close ended

Dilution levy
Gate
suspend redemptions

Gear
suspend
sell properties

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5 limitations of EMH

Assumes standard deviation as measure of risk.
Does not take into account attitude to risk/capacity for loss.
Uses historic data to predict expected returns.
Excludes impact of costs and charges.
Assumes portfolio uses passive funds/cannot factor Alpha.

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definition 5 tactical

Varying weightings/allocation;
short term;
with frequent rebalancing.
Substantial variation from objective.
Take advantage of market changes

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5 benefits of capm

Easy to calculate/uses widely available information.
Takes account of systematic/market risk.
Reflects fact most portfolios are diversified to remove unsystematic risk.
Robust/trusted.
Gives an expected return/benchmark.

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6 fees in ocf

Management fee/Annual Management Charge.
Administration fees/secretarial/directors fees/insurance.
Marketing.
Audit/tax compliance fees.
Registration/regulatory fees.
Custody/depositary/trustee.

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5 additional fees to OCF

Transactions fees/initial charge/spread/Stamp Duty.
* Performance fees.
* One off legal/professional charges.
* Interest/gearing costs.
* Adviser charge.

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8 whether to invest in…

Charges.
Tracking error
Standard deviation
Dealing frequency.
performance
Dividends.
passive/active.
Counterparty risk.

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Sovreign debt risks 8

Local economics
Govnt policy
Unsecured
Rating of country
Local inflation
Can’t be sued
Currency

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1 note on PIBS 1 note on pre shares

con cumulative, nominal amount paid out not share price

5 features of money markets

* Tradable * fixed term * lowish credit risks * £Big * Institutions & &

How does SONIA work

o Interest rate benchmark o Administered by B of E o Average interest rate banks pay to borrow overnight from other institutions

whats sub investment grade

2 B or less bad

Macaulay defintion 5

weighted average number of years an investor must retain a bond where the cash flows equals the amount paid for the bond.

2 factors that effect duration

Term to redemption and coupon rate

Standard deviation calcs

average distance square average square

5 systematic risks

IR Inflation Currency Political Tax

7 non systematic

default credit liquidity Operational shortfall reinvestment regulatory

2 passive risks

Market - follows Style - replication causes tracking error

6 factors where to invest

Charges Style/objective Alpha Sd Sharpe/ir Financial strength Manager Dividend yield

5 effects of current account ring n deficit

Increase ir to slow demand for imports or increase foreign investment Growth falls due to fiscal and monetary Weak pound Uses foreign reserves Inflation increases

Tracking error caused

Inaccuracy of method eg sampling Fees Currency hedging Cash drag Tax Div reinvestment lag

Capm mpt assumptions

Risk averse Information available to all same time Costs Holding period same for everyone Buyers sellers can’t affect price Unlimited borrowing risk free Manu buyers sellers

3 benefits and 3 drawbacks platform not direct

Income flexibility Pre funding Institution class Services not used Can’t hold alternative income products Exit charges

3 platform due diligence

Cash account ir Continue existing income uninterrupted

Income options on platform via cash account

Pay natural income Pay regular income Pay ad hoc

4 benefits of platform consolidation

Consolidated payments Bed and isa Transaction history Migrate to Lower find charges

3 impacts to consider on advice firm platform switching

Reputation Conflict of interest Cost to firm

3 client impact platform switching

Data breach Transaction history loss Income outage

3 objectives to rebalancing

CFL Invest cash Change of objectives

5 rebalance issues to consider

Frequency Auto manual Retain benchmark or alter Liquidity Trading costs

Reasons for investments falling (3)

One off event Poor sector High beta or sd

2 issues with sharp ratio

Costs Assumes sd as measure of risk

2 limitations of roce

Single period Distorted by one off factors Not just sh but creditors too

Ucits rules 3

16 holdings 4 10% 5% others

2 wp bonuses

Annual - regular, variable, can’t be removed Final - one off, on maturity, death, surrender, not guaranteed

Unitised versus conventional (4)

Units Bonus in advance Easier to switch Easier to value

3 things acd does oeic 3 depositary

Valuations/pricing Prepares accounts Reporting Custodian Monitors acd Monitors borrowing limits

5 Segmentation benefits

Can encase whole segments Assign Reduce chargeable gain Defer chargeable gains Maximise top slicing

Active v passive better 4

No alpha to be had Market efficient Technical analysis doesn’t work Costs

Risks list 6

Geography Non systematic Sector Economic Liquidity Protection

Manager style factors

Administration and access Bespoke/bulk buying Costs/charges/control Diversifications Expertise/exercise voting rights Regulatory

Drawbacks of mwr hpr 4 bullets

Timing of cash flows Outside control of fund manager Was it a result of who or when Not good for comparing

Suitability factors 1

Atr Timescales Health Liabilities Experience Tax Ethical Vulnerability

Suitability factors 2

CFL Objectives Risk Performance Liquidity Emergency Costs Style