Long-Term Direct Investment Risks
Case Study: Risk Management for Long-Term Direct Investments Background: ABC Investments is an institutional investor specializing in long-term direct investments in private companies. As a CFA Level 3 candidate, you have been asked to discuss various methods to manage the…
Financial and Non-Financial Risk Exposures
Case Study: Analysis of Financial and Non-Financial Risk Exposures in the Portfolio Strategy of ABC Investments Background: ABC Investments is an institutional investor managing a diversified portfolio on behalf of its clients. The portfolio includes asset classes such as equities,…
Challenges Related to Environmental and Social Factors Encountered by Institutional Investors
Universal Ownership, Externalities, and Responsible Investing The challenge for universal owners lies in effectively managing risks stemming from these externalities. Costs externalized by one portfolio company can impact the profitability of others, affecting overall returns. For instance, investments in a…
Challenges in Financial Risk Encountered by Institutional Investors
Dimensions of Financial Risk Management The primary goal of risk management is to prevent threats that could endanger an organization’s existence. These threats encompass financial, like market losses and liquidity issues impacting cash flow, and non-financial risks, such as reputational…
Risk Exposures During Early Retirement Stage
Early retirement, typically around age 65, marks a significant life transition. Clients in this stage aim to stop working and begin utilizing their accumulated financial resources for their lifestyle needs. Advisors should maintain up-to-date records as clients in early retirement…
Risk Exposures During Peak Accumulation Stage
The peak accumulation years represent a phase when individuals enjoy the culmination of their professional expertise, ideally resulting in the highest lifetime earnings. This stage follows the career development phase and precedes retirement. As in previous life stages, advisors must…
Risk Exposures During the Career Development Stage
The career development stage involves clients who have progressed economically. Advisors in this stage must update all client data, including income, pensions, budgets, and economic balance sheets. Unlike the early career stage, clients in the career development stage often: Possess…
Early Career Stage: Identifying and Analyzing Risk Exposures
The risk management process consists of four steps for individuals: State the objective. Pinpoint risks. Assess risks and choose appropriate methods to manage it. Observe outcomes and risk exposures and make adjustments in methods as needed. An economic balance sheet…
Tactical Asset Allocation
Institutional investors often employ an active risk budget, typically gauging how much their portfolio deviates from the investment policy targets annually, often as a tracking error limit. This limit might be increased to seek higher returns or decreased to reduce…
Selecting an Asset Manager
It is a fact that the Code of Ethics and Standards of Professional Conduct apply to all CFA stakeholders and that candidates hoping to pass the exams need to be well versed in the Ethics material. This Los provides a…
