CIMA - Certified Investment Management Analyst Manager Search and Selection Questions and Answers

Question 1

An institutional investment committee is in the process of selecting a new large-cap growth equity manager.
They have narrowed the field to a few finalists who have all provided performance data and marketing materials.
What is the MOST crucial next step in their due diligence process to gain a deeper, forward-looking insight into a manager's capabilities?

Accepted Answer

Perform on-site interviews to assess the key personnel, the repeatability of the investment process, and the firm's culture.

Answer

Conduct a detailed quantitative analysis focusing on the past five years of Sharpe ratios and information ratios.

Answer

Issue a formal Request for Proposal (RFP) to all finalist candidates to standardize the data collection.

Answer

Compare the fee schedules of the finalist managers to identify the most cost-effective option.

Question 2

During a qualitative due diligence review of a potential investment manager, which of the following findings would be the BIGGEST red flag regarding the 'Process' component of the evaluation?

Accepted Answer

The stated investment process is highly discretionary and lacks documented procedures for security selection and portfolio construction.

Answer

The portfolio manager has final decision-making authority on all trades.

Answer

The firm's investment philosophy has remained unchanged for over a decade.

Answer

The research team consists of generalists rather than dedicated sector specialists.

Question 3

A CIMA professional is helping a pension fund create a Request for Proposal (RFP) for a new fixed-income manager. To ensure they receive comparable and relevant responses, which of the following is the LEAST critical component to include in the RFP document?

Accepted Answer

A list of the investment manager's three largest current clients.

Answer

Detailed historical performance data requirements (e.g., gross and net-of-fee returns, attribution analysis).

Answer

Specific questions about the investment team's structure, experience, and compensation.

Answer

A clear description of the investment mandate, including objectives, constraints, and the benchmark.

Question 4

When conducting quantitative analysis as part of manager selection, relying solely on historical returns can be misleading. Which of the following metrics is MOST useful for evaluating the consistency of a manager's active returns relative to their benchmark?

Accepted Answer

Tracking Error

Answer

Standard Deviation

Answer

Sharpe Ratio

Answer

R-squared

Question 5

An investment committee has hired a new manager. Which of the following activities is a critical component of the ONGOING monitoring process, rather than the initial selection process?

Accepted Answer

Performing periodic attribution analysis to confirm the sources of excess returns.

Answer

Conducting an on-site visit to meet the portfolio management team.

Answer

Verifying the manager's reported assets under management (AUM).

Answer

Reviewing the manager's Form ADV for any regulatory disclosures.

Question 6

In the context of manager selection, a 'Type I error' refers to which of the following situations?

Accepted Answer

Hiring a manager who subsequently underperforms expectations.

Answer

Failing to hire a manager who subsequently performs very well.

Answer

Terminating a manager who subsequently performs very well.

Answer

Retaining a manager who consistently meets performance expectations.