IFC Investment Strategies 2

Question 1

A portfolio manager using a 'core-satellite' strategy allocates the largest portion of assets to which component?

Accepted Answer

A broadly diversified low-cost index fund

Answer

The core component of a core-satellite strategy is a passive, broadly diversified index fund designed to capture market returns efficiently.

Question 2

Which investment strategy seeks to profit from pricing discrepancies between a convertible bond and the underlying equity?

Accepted Answer

Convertible arbitrage

Answer

Convertible arbitrage exploits mispricings between a convertible bond and its underlying stock, typically by going long the bond and short the equity.

Question 3

A fund manager who tilts holdings toward small-cap value stocks relative to the benchmark is implementing which style of active management?

Accepted Answer

Factor investing (smart beta)

Answer

Tilting toward factors such as size and value relative to a benchmark is the defining characteristic of factor or smart-beta investing.

Question 4

Under the IFC curriculum, which metric best captures the return earned per unit of total risk taken by a fund?

Accepted Answer

Sharpe ratio

Answer

The Sharpe ratio divides excess return by standard deviation (total risk), making it the primary risk-adjusted measure per unit of total risk.

Question 5

An investor following a 'barbell' fixed-income strategy would hold which combination of bonds?

Accepted Answer

Short-term and long-term bonds, with minimal intermediate exposure

Answer

A barbell strategy concentrates holdings at the short and long ends of the yield curve while avoiding intermediate maturities.

IFC - Investment Funds in Canada Practice Test

IFC - Investment Funds in Canada Practice Test

IFC Investment Strategies 2