Chapter 22 Flashcards
What are the components of the investment management process?
I.) planning.
II.) execution.
III.) feedback.
What are the components of investment policy statement?
- brief client description.
- Purpose of establishing policies and guidelines.
- duties and investment responsibilities of party involved.
- Statement of investment, goals, objectives, and constraints.
- Schedule for review of investment performance in the IPS.
- Performance measures and benchmarks.
- Considerations in developing strategic asset allocation.
- Investment strategies, and investment styles.
- Guidelines for rebalancing.
What are the objectives of a portfolio policy?
Risk tolerance and return requirements
What are the constraints of a portfolio policy?
Liquidity, investment horizon, regulation, taxes, and unique means (such as ethical concerns, age, wealth in specific hedging)
What may the return requirement of an individual be based upon?
Their lifecycle, in which stage they are currently in.
Which stage is an individual investor most likely to take on the highest amount of risk
When they are young.
What is the risk tolerance of non-life insurance – companies?
Conservative.
Why may personal trusts avoid high risk investments?
Due to the prudent investor rules that they are subjected to
What type of portfolio creation may institutional investors utilize?
The top down policy, which is created by an investment committee which layers of the asset universe.
Who is taking on a risk if a pension fund is using defined benefit?
The company is taking on the risk
What does a CFA institute mention as the necessary steps to planning in the investment management process
A.) identifying, and specifying the investors objectives and constraints.
B.) Creating an IPS.
C.) forming capital market expectations.
D.) creating the strategic asset allocation.
