- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 3. Portfolio Management: An Overview
- Subject 2. Steps in the Portfolio Management Process
CFA Practice Question
Which of the following constraints would most likely appear in the unique needs and preferences section of a trust's investment policy statement? The portfolio is ______.
B. prohibited from investing in tobacco companies
C. prohibited from holding less than 5% in cash instruments
A. subject to the prudent-man standard
B. prohibited from investing in tobacco companies
C. prohibited from holding less than 5% in cash instruments
Correct Answer: B
Unique needs and preferences include the prohibition of certain investments. The investment constraints of liquidity, tax concerns, and legal and regulatory factors adequately address the portfolio's other constraints.
User Contributed Comments 3
| User | Comment |
|---|---|
| amityadav | Why not C? Though it will be upto the PM but cant it be inlcuded in IPS for such preference as mentioned in C. |
| Olesya_CFA | I thought so too but then this came to my mind: keeping more than 5% in cash could be a general requirement for many investment institutions. Nothing super unique about it. However tobacco is clearly something very specific for a certain type of investors. It's their personal preference. So the answer makes sense to me. |
| khalifa92 | "unique" |