Chapter 5 - Role of investment manager

Question 1

active management

Answer 1

using analysis in attempt to outperform the market

Question 2

passive management

Answer 2

self-maintaining, does not seek to outperform the market

Question 3

tactical asset allocation

Answer 3

• short-term variation of the asset allocation to take advantage of market changes or fluctuations
• used to counteract the defensive tendencies of asset allocation methodology

Question 4

core-satellite

Answer 4

• aim is to generate performance in excess of the index. majority in passive (core), remainder in active (satellite)

for example:

• indexing 70%-80% of a portfolio to minimise underpeformance risk
• remainder in a number of specialist actively managed funds or individual securities (known as satellites)