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CFA Level I · CFA Level I Exam · Portfolio Management: An Overview

An investment policy statement (IPS) for a client states that the client is 35 years old, has stable employment income, and has no near-term liquidity needs. This information would most likely be used to assess the client's:

The facts point to the client's ability to take risk. A young investor with stable income, a long horizon and no near-term liquidity needs can absorb investment losses, so financial capacity for risk is high. Benchmarks and rebalancing policies are separate IPS components.

  1. Aability to take riskCorrect
  2. Btax-adjusted benchmark
  3. Cportfolio rebalancing frequency

Explanation

Age, stable income and a long time horizon with no near-term liquidity needs describe the client's financial capacity to absorb losses, which is ability to take risk. A benchmark and rebalancing policy are set after objectives and constraints are established, not directly determined by these facts.

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