Investment process
The basic format and general principles by which a manager selects and manages investments. Standard V(B) requires it to be disclosed to clients and prospects, with any material change disclosed promptly.
Where you will meet it
Investment process appears in 6 learning outcomes on the CFA syllabus. A few of them:
- Put the Communication with Clients standard, V(B), into practice
“Members must also disclose the basic format and general principles of the investment process, promptly disclose any material change to it, identify significant limitations and risks, and distinguish clearly between fact and opinion.”
- Show a deep grasp of CFA Institute's Code and Standards by using them to resolve particular cases
“Communication now has five parts: disclose the nature and costs of services, including costs arising at affiliates and third parties; describe the investment process and promptly disclose material changes to it; disclose significant risks and limitations; include the important factors; and separate fact from opinion.”
- Show firm command of the Code and Standards by applying them to professional integrity cases under Standard V, Investment Analysis, Recommendations, and Actions
“Under V(B), clients must be told how the investment process works, in outline, and of any material change to it, such as adding leverage or losing a key manager, along with its significant risks and limitations, and the manager must separate fact from opinion.”
- Explain what performance measurement, attribution and appraisal each contribute to evaluating a portfolio and how the three link together
“The findings then feed back into the investment process.”
Practise it
Practise investment process until it is automatic: questions that explain every wrong option.
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