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

In the portfolio management process, which step is carried out first, before the portfolio manager selects the asset classes and securities for a client?

The first step is understanding the client's objectives and constraints and documenting them in an investment policy statement. Only after this can the manager decide asset allocation and security selection. Execution, rebalancing and performance evaluation come later in the process.

  1. ARebalancing the portfolio
  2. BEvaluating performance against the benchmark
  3. CPreparing the investment policy statement after understanding the client's objectives and constraintsCorrect
  4. DExecuting trades in the market

Explanation

The process begins with understanding the client's objectives, risk tolerance, time horizon and constraints and recording them in an investment policy statement. Asset allocation, security selection, execution, rebalancing and performance evaluation follow. Evaluating performance is a later step, not the first.

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