Liquidity Constraint - Write down cash needs or not?

CFA Level III Portfolio Management
#1

Hi all,

Just to clarify, under the “Liquidity” constraint are we supposed to list the client’s distribution needs? (even though they will also show up under the Objectives - Return - section)?

On exercise #2 in Schweser (p.16) they only wrote down the cash reserve for emergencies. However, on p.17 the text clearly states we are supposed to indicate these cash needs under this constraint. They say “the need for ongoing distributions should be disclosed and analyzed in calculating the return objective…however the recommended course is to also show it here”

Thanks ppl.

#2

If there are immediate cash needs, you should definitely write a bullet point for those.

#3

What if they say, for instance, that $50k is necessary each year to pay for living expenses?

I know that’d be factored in on the return calculation but should it also be written down in the Liquidity section?

Thanks Magician :slight_smile:

#4

I’d include it, assuming that the investment portfolio has to provide it.

Heads, you win; tails, you tie.