Chapter 8

Question 1

Global investment performance standards (GIPS)

Answer 1

This represents the global standards for calculating and presenting performance figures. In 2019 the uk approved this also.

Question 2

Caps and WM

Answer 2

Combined actuarial performance services or world markets

Question 3

MSCI PIMFA wealth management benchmarks

Answer 3

This is a key uk benchmarks for private client portfolio performance and is widely used by investment managers and financial advisors.

Question 4

Stock market indices

Answer 4

Uses
To ack as a market barometer
Asset in performance measurement.
To act as a basis for fund trackers
Support portfolio management.
The main types of market index’s
Price weighted indices
Market cap weighted index
Equal weighted index

Question 5

Indexes

Answer 5

FTSE 100 = 100 largest uk blue chip stocks
FTSE all share = companies listed on the LSE
MSCI world index = free floated market cap weighted of develop markets
S&P 500 = top 500 companies in the USA
Nikkei 250 & 400 = big ones in Japan.

Question 6

Absolute and relative return

Answer 6

Absolute = measure of gain as a % against the original invested
Relative = returned compared against benchmark
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Question 7

Calculating performance of asset allocation

Answer 7

Return X amount allocated
Do this for each asset to work out overall return of the portfolio to assess different structuring options

Question 8

Holding period return calculation

Answer 8

Holding period rate of return = 1 + return gained on investment x 1+ rate gained on currency exchange

Question 9

Risk to reward ratio

Answer 9

This is how to measure the expected return to the amount of risk taken.
= expected profit/ possible loss