Individual & Institutional Investors

CFA Level III Portfolio Management
#1

Feeling bummed at Individual & Institutional investors topic. Scoring abysmally low in these topics in every mock.

Howto go about it - Schweser theory + cfai EOC / cfai theory + EOC?

Especially the return requirement questions are pain in the…, Well you know.

#2

Don’t worry! It’s great that you have spotted a weakness of yours one month before the exam. You still have enough time to put things right.

Practice a few questions from CFAI EOC and do a few past AM papers.

Write down every cash in- and outflow in the current year and next year, make the calculations and then compare the liquidity requirement to the investable asset base. Do this for a start and then move to the next level (pre-tax nominal required rate of return, after-tax real required return, what adjustments to make for the inflation component etc.)

#3
  • List the client objectives Quantify their current assets. This is their __PV__. Calculate the time horizon. This is __n__. Calculate what they will need on an annual basis. This is their __PMT__. This is sometimes a predictable annual payment (like a mortgage) or the sum of their total living expenses (accounting for time value) NET of their income (so total inflow or outflow). Make sure you also apply nominal/real and pre/post tax to these inputs if needed. Calculate their __FV__. This is often equal to the __PV__ adjusted for inflation over the time horizon. Calculate the % return needed __(I/Y)__

Good summary article on the return calculation here