CFA Level I · CFA Level I Exam · Basics of Portfolio Planning and Construction
Which IPS component most likely addresses a client's preference to exclude tobacco company securities from the portfolio?
Unique circumstances is the component that records such an exclusion. It covers client-specific preferences, including ethical or ESG restrictions on securities like tobacco companies. Time horizon relates to the investment period, and return objective relates to target returns, so neither captures the exclusion.
- AUnique circumstancesCorrect
- BTime horizon
- CReturn objective
Explanation
Ethical or social exclusions and other special preferences are recorded as unique circumstances (constraints). Time horizon concerns the investment period and return objective concerns required return.
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