Portfolio Mgt And Investment Policy Statement

Question 0

Components of planning phase include

Answer 0

Analyzing objectives and constraints
Developing IPS
Determining appropriate investment strategy
Selecting appropriate asset allocation

Question 1

Three steps to portfolio management process

Answer 1

1. Planning
2. Execution
3. Feedback

Question 2

What are risk investment objectives

Answer 2

Investors’ willingness (psychological/subjective) and ability (size of portfolio, time horizon, liquidity) to accept risk

Risk tolerance/aversion

Question 3

What are return investment objectives

Answer 3

Classed as desired return or required return (financial obligation)

Measured as total return (capital gain and income)

Consistent with risk objectives

Question 4

List 5 investment constraints

Answer 4

Liquidity 
Time horizon
Tax constraints 
Legal/regulatory (ie prudent investor rule)
Unique circumstances

Question 5

What are three purposes of investment policy statement (IPS)

Answer 5

Provide guidance on adviser decisions
Promote long term discipline in investment decision making
Protects against short term strategy shifts due to market conditions

Question 6

Include these elements in IPS:

Answer 6

Description of client situation 
Purpose and responsibilities 
Objectives and constraints
Schedule of perf/ IPS reviews
Asset allocation ranges 
Guidance for rebalancing/adjusting

Question 7

Three common approaches to investing

Answer 7

Passive strategies (indexing, buy and hold)
Active strategies (manage for positive alpha, specific style, etc)
Semi-active / risk controlled / enhanced active (tilt weightings based on mkt expectations)