CIFC Investment Strategies and Portfolio Management 2

Question 1

Which portfolio rebalancing approach triggers trades only when an asset class drifts beyond a set percentage band from its target?

Accepted Answer

Threshold rebalancing

Answer

Threshold (or tolerance-band) rebalancing triggers trades when an allocation drifts past a pre-set band, regardless of calendar date.

Question 2

A fund manager overweights technology stocks because she believes the sector will outperform over the next six months. This is an example of:

Accepted Answer

Tactical asset allocation

Answer

Tactical asset allocation involves short-term deviations from the strategic mix to exploit perceived market opportunities.

Question 3

The Sharpe ratio measures excess return per unit of:

Accepted Answer

Total risk (standard deviation)

Answer

The Sharpe ratio divides a portfolio's excess return over the risk-free rate by its total standard deviation.

Question 4

An investor holds a bond fund and an equity fund that historically move in opposite directions. The primary benefit exploited is:

Accepted Answer

Negative correlation for diversification

Answer

Combining negatively correlated assets reduces portfolio volatility, which is the core diversification benefit.

Question 5

Core-satellite portfolio construction typically places index funds in the core because they:

Accepted Answer

Provide low-cost broad market exposure

Answer

Index funds offer diversified market exposure at low cost, making them ideal as the stable core of the portfolio.

(CIFC) Canadian Investment Funds Course Practice Test