Investment Strategies Flashcards
7 cards from real IFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Investment Strategies flashcards as text
A portfolio manager using a 'core-satellite' strategy allocates the largest portion of assets to which component?
Answer: A broadly diversified low-cost index fund
The core component of a core-satellite strategy is a passive, broadly diversified index fund designed to capture market returns efficiently.
Which investment strategy seeks to profit from pricing discrepancies between a convertible bond and the underlying equity?
Answer: Convertible arbitrage
Convertible arbitrage exploits mispricings between a convertible bond and its underlying stock, typically by going long the bond and short the equity.
A fund manager who tilts holdings toward small-cap value stocks relative to the benchmark is implementing which style of active management?
Answer: Factor investing (smart beta)
Tilting toward factors such as size and value relative to a benchmark is the defining characteristic of factor or smart-beta investing.
Under the IFC curriculum, which metric best captures the return earned per unit of total risk taken by a fund?
Answer: Sharpe ratio
The Sharpe ratio divides excess return by standard deviation (total risk), making it the primary risk-adjusted measure per unit of total risk.
An investor following a 'barbell' fixed-income strategy would hold which combination of bonds?
Answer: Short-term and long-term bonds, with minimal intermediate exposure
A barbell strategy concentrates holdings at the short and long ends of the yield curve while avoiding intermediate maturities.
Which of the following best describes 'sector rotation' as an investment strategy?
Answer: Shifting allocations among industry sectors based on the economic cycle
Sector rotation involves moving capital into sectors expected to outperform and out of sectors expected to underperform based on economic cycle positioning.
A Canadian balanced mutual fund that maintains a fixed 60% equity / 40% fixed income split is employing which rebalancing approach?
Answer: Strategic asset allocation with periodic rebalancing
Maintaining a fixed long-term target mix and returning to it periodically is the hallmark of strategic asset allocation with rebalancing.