Portfolio Management Quiz 1

1 Match each step with the investment management implementation process it is a part of

Liability analysis	Define / review investment objectives	Formulate Investment strategy	Implementation and portfolio management	Monitoring/review
					Investment
					Tactical asset allocation
					Stock selection
					Asset allocation
					Analysis
					Select manager
					Risk/return
					Performance
					Short-term/long-term
					Benchmarks

2 Rationales for investing in certain asset types

current income	tax-effective income	income	stability	long-term stability	short-term stability	inflation hedge	long term inflation hedge	cash flow matching	liquidity	growth	superior long-term growth	diversification against domestic assets
													Cash
													Fixed interest
													Inflation-linked securities
													Infrastructure
													Property
													Shares
													Development capital
													International shares
													International fixed interest

3 Four of the common ways in which it is possible to examine the role of an assert component in a portfolio

At the most basic level, the objectives for a component part should not be inconsistent with the portfilion achieving the overall objectives.

- The different characteristics of the common asset classes mean that different asset classes can play different rules in meeting a client's liabilities.

The role of an asset component in a portfolio can be looked at from the angle of economic exposures.

Portfolio strucuture can be looked at from the angle of risk budgeting.

4 IMA=

5 The IMA usually contains schedules describing:

the investment

investments

investment

requirements

management

6 IFSA=

and

7 The common ways to monitor investment managers are based on information about

1.

2.

3.

8 The four steps in the portfolio management process are:

1	2	3	4
				decide on an appropriate portfolio structure, ie. balanced or sector-specialist manager.
				undertake an analysis of the fund's liabilities
				establish an asset allocation for the fund
				establish investment objectives for the fund

9

An understanding of the and its is the starting point for any portfolio management process.

10

The investment should form the basis upon which an investment is established.

11 Investment objectives typically include:

a statement of over a given time period

a statement of the of that is acceptable

a over which the success of the investment strategy will be measured.

12 Most investment strategies are designed using the top-down approach because it is

relatively

to

for clients using professional advisers to assist them in the task.

13 Steps taken to manage an investment portfolio are:

1	2	3	4	5
					report performance and strategy to the client
					determine which securities to buy/sell (portfolio construction)
					research the market conditions
					monitor the portfolio's performance and investment decisions
					order and process the required trades