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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process

A portfolio manager sets a long-term allocation of 60% equity and 40% debt for a client, and holds it with periodic rebalancing, regardless of short-term market views. This is best described as:

This is strategic asset allocation. Long-term target weights are set from the client's profile and the portfolio is periodically rebalanced to them. Tactical allocation would instead deviate temporarily from the targets based on short-term market views, which the manager here deliberately avoids.

  1. AStrategic asset allocationCorrect
  2. BTactical asset allocation
  3. CMarket timing
  4. DPure stock picking

Explanation

Strategic asset allocation fixes long-term target weights based on the client's profile and rebalances back to them. Tactical allocation, by contrast, makes short-term deviations from the targets to exploit market views. Here the manager ignores short-term views, so the approach is strategic.

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