CIFC Investment Strategies and Portfolio Management 3

Question 1

In a liability-driven investing (LDI) strategy, the primary benchmark for portfolio construction is:

Accepted Answer

The present value of the investor's future liabilities

Answer

LDI aligns portfolio assets with the characteristics of future liabilities, making liabilities the effective benchmark.

Question 2

A portfolio with a beta greater than 1.0 is expected to:

Accepted Answer

Amplify market movements up and down

Answer

A beta above 1.0 indicates the portfolio moves more than the market in both directions.

Question 3

Which asset allocation approach keeps a fixed proportion in each asset class by continuously selling winners and buying laggards?

Accepted Answer

Constant-mix strategy

Answer

A constant-mix strategy maintains fixed weights by trimming outperformers and adding to underperformers, acting as a contrarian approach.

Question 4

Correlation coefficients range from -1 to +1. A coefficient of 0 between two assets means:

Accepted Answer

There is no linear relationship between their returns

Answer

A correlation of 0 indicates no linear relationship; returns of the two assets move independently of each other.

Question 5

The efficient frontier represents portfolios that:

Accepted Answer

Maximize return for a given level of risk

Answer

The efficient frontier plots the set of portfolios offering the highest expected return for each level of risk.

(CIFC) Canadian Investment Funds Course Practice Test