CFA Practice Question

CFA Practice Question

Jacob Miller, CFA runs a mutual fund Enhanced Global Equity whose stated objective is to identify and invest in the equity of undervalued global firms. Miller believes that stock markets around the world are currently too high. He sells the equity holdings of the fund and invests in domestic corporate bonds (which he believes are currently undervalued). Has Miller violated the Standards?
A. Yes, Diligence and Reasonable Basis.
B. No.
C. Yes.
Explanation: Money managers must take investment decisions consistent with their stated objectives. For example, a money manager for a Global Equity fund investing in domestic corporate bonds would be a violation of suitability.

User Contributed Comments 3

User Comment
bd1984 Global: you can invest in your own country, International: you can not invest in your own country.
cwest020 Its a violation, different asset class. Its not suitable to invest in commodities when managing a bond fund.
GBolt93 If you believed the market was overvalued could you liquidate part of the equity position and invest it in Money market securities instead of leaving it in cash?
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