CPS Investment Strategies and Asset Allocation 2

Question 1

What is 'liability-driven investing' (LDI)?

Accepted Answer

Structuring a portfolio to meet specific future liabilities

Answer

LDI structures a portfolio specifically to match and fund known future liabilities such as pension payments.

Question 2

What is 'dynamic asset allocation'?

Accepted Answer

Adjusting asset mix based on changing market conditions or economic outlook

Answer

Dynamic asset allocation involves actively adjusting the portfolio's asset mix in response to changing market conditions, valuations, or economic forecasts.

Question 3

What characterizes an 'absolute return' investment strategy?

Accepted Answer

Seeking positive returns regardless of market direction

Answer

Absolute return strategies aim to generate positive returns in all market conditions, unlike relative return strategies that are judged against a benchmark.

Question 4

What is a 'barbell strategy' in fixed income portfolio management?

Accepted Answer

Concentrating holdings in short-term and long-term bonds while avoiding intermediate maturities

Answer

A barbell strategy concentrates bond holdings at two extremes — very short and very long maturities — while avoiding intermediate-term bonds.

Question 5

What does 'international diversification' add to a US-focused portfolio?

Accepted Answer

Exposure to different economic cycles and growth opportunities beyond the US

Answer

International diversification provides exposure to different economic cycles, growth rates, and opportunities that may not correlate strongly with US markets.

CPS - Certified Portfolio Specialist Practice Test

CPS - Certified Portfolio Specialist Practice Test

CPS Investment Strategies and Asset Allocation 2