Manager Search and Selection Flashcards
7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Manager Search and Selection flashcards as text
Which database is most commonly used by investment consultants to screen investment managers during the initial search phase?
Answer: eVestment
eVestment is the primary institutional database used by consultants to screen and compare investment managers across strategies.
What is 'style drift' in the context of investment manager evaluation?
Answer: A manager deviating from their stated investment style or mandate
Style drift occurs when a manager deviates from their stated investment style, which can disrupt a client's intended asset allocation.
In a manager search RFP, which section most directly reveals whether the manager's investment process is repeatable?
Answer: Investment philosophy and process description
The investment philosophy and process section documents the systematic approach the manager uses, indicating whether results can be consistently replicated.
A consultant is evaluating two managers with identical 5-year returns. Manager A has a Sharpe ratio of 1.2 and Manager B has a Sharpe ratio of 0.8. What does this indicate?
Answer: Manager A generated higher risk-adjusted returns per unit of volatility
A higher Sharpe ratio indicates that Manager A generated more return per unit of risk (standard deviation), making them more efficient on a risk-adjusted basis.
What is the primary purpose of a 'finals presentation' in the manager selection process?
Answer: To allow shortlisted managers to present directly to the investment committee
The finals presentation gives shortlisted managers the opportunity to present their strategy, team, and process directly to decision-makers before a final selection is made.
Which of the following best describes 'benchmark hugging' as a concern in manager evaluation?
Answer: A manager whose portfolio closely mirrors the benchmark, offering little active value
Benchmark hugging describes a manager whose portfolio closely resembles the index, generating minimal active return while still charging active management fees.
When assessing a manager's organizational stability, which factor is considered a 'red flag' during due diligence?
Answer: High turnover among senior portfolio managers in the past two years
High portfolio manager turnover raises concerns about team cohesion, continuity of the investment process, and the firm's ability to retain key talent.