CIMA - Certified Investment Management Analyst Investment Policy and Process Questions and Answers

Question 1

An investment advisor is developing an Investment Policy Statement (IPS) for a new client, a recently retired individual.
Which of the following components is MOST critical to define the client's willingness and ability to endure market fluctuations?

Accepted Answer

Risk Tolerance

Answer

Time Horizon

Answer

Liquidity Needs

Answer

Tax Considerations

Question 2

A CIMA professional is reviewing a client's portfolio and notices a significant deviation from the strategic asset allocation targets outlined in the Investment Policy Statement (IPS). What is the MOST appropriate first step in the investment process?

Accepted Answer

Contact the client to discuss potential revisions to the IPS.

Answer

Immediately rebalance the portfolio to the original targets.

Answer

Sell the outperforming asset class to realize gains.

Answer

Conduct a manager search for a better-performing fund.

Question 3

Which of the following is considered a primary objective within an Investment Policy Statement (IPS), as opposed to a constraint?

Accepted Answer

The client requires $50,000 in annual income.

Answer

The client has a strong preference for socially responsible investments.

Answer

The client's portfolio must not invest in derivatives.

Answer

The client needs to liquidate a portion of the portfolio in three years for a down payment.

Question 4

A family foundation's Investment Policy Statement (IPS) specifies a long-term return objective of inflation + 5% to maintain its real purchasing power and support its spending policy. This is an example of what type of investment objective?

Accepted Answer

Absolute Return

Answer

Total Return

Answer

Relative Return

Answer

Risk-Adjusted Return

Question 5

When constructing an Investment Policy Statement (IPS), which of the following best describes the role of capital market expectations?

Accepted Answer

To ensure the investment objectives are realistic and achievable.

Answer

To dictate the client's specific risk tolerance.

Answer

To establish the legal and regulatory framework for the portfolio.

Answer

To define the client's unique liquidity and time horizon constraints.

Question 6

A CIMA candidate is working with an institutional client to draft an Investment Policy Statement (IPS). The client is a defined benefit pension plan. Which of the following constraints is likely to be the MOST significant for this type of client?

Accepted Answer

Time Horizon

Answer

ESG (Environmental, Social, and Governance) preferences

Answer

Tax Concerns

Answer

Unique Circumstances