Investment process 2

Investment process 2

1. Making investment decisions

   • Planning
     • Analyse ones investment clients
       • Considering the objectives and constraints that govern their decisions. Specifically focuses on risk return trade-off
       • Constraints may include liquidity, investment horizon, regulations, tax considerations and unique needs
     • Formulate investment policy statement
       • IPS serves as a strategic guide to the planning and implementation of an investment program. One of the more important purposes for IPS is that it can offer an objective course of action to be followed during periods of disruption when emotional or instinctive responses might otherwise motivate less prudent actions.
       • A well constructed IPS should detail how the investment program will be governed, the procedure for making asset allocation decisio, risk management strategies, how investment performance will be monitored, who is accountable for various aspects of the investment management process, reporting requirements and course of action during crisis.
       • Asset allocation
         • Specifying asset classes to be included in the portfolio, developing expectations of future capital market performance, identifying the frontier of efficient portfolios and determining the optimal mix of assets
     • Developing capital market expectations
     • Determining the strategic asset allocation
   • Execution
     • Fleshes out the details of optimal asset allocation and security selection
   • Feedback
     • Process of adapting to changes in expectations and objectives as well as to changes in portfolio composition that result from changes in market prices

2. Standard 3: Duties to Clients

   • Requires CFA member to -determine who their client is, who they owe a duty of care to and whose confidentiality they must preserve -regard the interest of the client as paramount -treat all clients fairly so avoid favouring any one client over another in providing investment advice -determine and judge the suitability of investments for client -provide credible performance info to client -preserve the confidentiality of info