Chapter 7 - Basics of portfolio planning and construction. This chapter is organized as follows: Section 2 discusses the investment policy statement, a written document that captures the client’s investment objectives and the constraints. Section 3 discusses the portfolio construction process, including the first step of specifying a strategic asset allocation for the client. Section 4 concludes and summarizes the reading. | Chapter 7 Basics of Portfolio Planning and Construction Presenter Venue Date This chapter is organized as follows: Section 2 discusses the investment policy statement, a written document that captures the client’s investment objectives and the constraints. Section 3 discusses the portfolio construction process, including the first step of specifying a strategic asset allocation for the client. Section 4 concludes and summarizes the reading. DISCLAIMER: Candidates should understand that this presentation is NOT a substitute for a thorough understanding of the CFA Program curriculum. This presentation is also NOT necessarily a reflection of all the knowledge and skills needed for candidates to successfully complete questions regarding this topic area on the CFA exam. 1 Reasons for a Written Investment Policy Statement (IPS) LOS: Explain the reasons for a written investment policy statement (IPS). Pages 296-297 The IPS is the starting point of the portfolio management process: It . | Chapter 7 Basics of Portfolio Planning and Construction Presenter Venue Date This chapter is organized as follows: Section 2 discusses the investment policy statement, a written document that captures the client’s investment objectives and the constraints. Section 3 discusses the portfolio construction process, including the first step of specifying a strategic asset allocation for the client. Section 4 concludes and summarizes the reading. DISCLAIMER: Candidates should understand that this presentation is NOT a substitute for a thorough understanding of the CFA Program curriculum. This presentation is also NOT necessarily a reflection of all the knowledge and skills needed for candidates to successfully complete questions regarding this topic area on the CFA exam. 1 Reasons for a Written Investment Policy Statement (IPS) LOS: Explain the reasons for a written investment policy statement (IPS). Pages 296-297 The IPS is the starting point of the portfolio management process: It allows the portfolio manager to assess the suitability of a potential investment for the client. In some countries, it is a legal or regulatory requirement. For institutions, it may set out governance arrangements for investment funds. Discussion points: The IPS will be developed following a fact finding discussion with the client. “Success” can be defined as a client achieving his or her important investment goals using means that he or she is comfortable with (in terms of risks taken and other concerns). . pension schemes must have a statement of investment principles under the Pensions Act 1995 (Section 35), and this statement is in essence an IPS. The . Financial Services Authority also has requirements for investment firms to “know their customers.” The European Union’s Markets in Financial Instruments Directive (MiFID) requires firms to assign clients to categories, such as professional clients and retail clients. Governance arrangements could cover the investment committee’s .
