CIC Cheat Sheet 2026

The 30 highest-yield CIC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Which risk measure considers ONLY returns below the mean or a minimum acceptable return? → Semivariance
2. Under the Investment Advisers Act, an investment adviser is prohibited from charging a performance fee to a client unless the client is a: → Qualified client meeting net worth or AUM thresholds
3. Which strategy aims to outperform market benchmarks? → Active management
4. What is fiduciary duty? → Acting in client's best interest
5. Under the Investment Advisers Act of 1940, the fiduciary duty owed by an investment adviser to a client is comprised of which two primary components? → Duty of Care and Duty of Loyalty
6. An investor increases gold and TIPS allocations prior to expected inflation spikes. This is an example of: → Tactical asset allocation using inflation hedges
7. Which risk is NOT reduced through portfolio diversification? → Systematic (market) risk
8. An investor wants to minimize tracking error relative to the S&P 500 while slightly overweighting technology. This best describes: → Enhanced indexing
9. An investment counselor uses a Monte Carlo simulation primarily to: → Model a range of possible outcomes by running thousands of random scenarios
10. Which measure best evaluates a portfolio manager's risk-adjusted performance relative to a benchmark? → Information ratio
11. What does the Sharpe ratio measure? → Excess return per unit of total risk (standard deviation)
12. What is liquidity in financial analysis? → Cash conversion ability
13. Which of the following best defines 'active return'? → Portfolio return minus the benchmark return over the same period
14. Under IAA Standards, which scenario best illustrates a violation of the prohibition on excessive trading? → Executing 12 trades per day in a small account primarily to generate commissions
15. Which factor most directly determines a client's ABILITY to take investment risk? → Financial capacity to absorb losses
16. What does asset allocation determine? → Distribution across asset classes
17. What is the primary objective of investment policy planning? → To align investments with client goals
18. Mean-variance optimization (MVO) is criticized for producing highly concentrated portfolios because it: → Is overly sensitive to small changes in expected return inputs
19. What is meant by risk-adjusted return? → Return relative to risk
20. What is 'tracking error' in the context of portfolio performance? → The standard deviation of the difference between portfolio returns and benchmark returns
21. A portfolio's beta of 1.4 indicates that for every 1% move in the market, the portfolio is expected to move: → 1.4%
22. Under ERISA, which standard applies to investment advisors managing pension plan assets? → Fiduciary standard
23. Which of the following BEST describes the concept of 'portable alpha'? → Using futures to separate alpha generation from beta exposure
24. In Brinson-Hood-Beebower (BHB) performance attribution, which three effects are analyzed? → Allocation effect, selection effect, and interaction effect
25. Under IAA Standards, which duty takes precedence when a client's short-term interests conflict with their long-term financial wellbeing? → Long-term wellbeing, as the adviser must act in the client's best interest overall
26. The Uniform Securities Act at the state level primarily governs investment advisers who: → Manage less than $100 million in AUM and have not registered with the SEC
27. Which document outlines investment objectives and constraints? → Investment policy statement
28. An IAA member discovers that a colleague is front-running client orders. What is the member's obligation? → Report the conduct to appropriate supervisory or compliance personnel
29. Which strategy seeks to balance risk and return dynamically? → Tactical asset allocation
30. Which portfolio construction approach seeks to minimize tracking error relative to a benchmark? → Enhanced indexing