Portfolio Management

Portfolio Management at CFA Level 3 represents an advanced application of investment principles, focusing on wealth management for individual and institutional clients. This capstone topic integrates earlier concepts from Levels 1 and 2 into comprehensive portfolio construction frameworks. The curriculum covers the entire investment management process: establishing investment policy statements (IPS), conducting investor risk profiling, determining asset allocation strategies, implementing portfolio decisions, and monitoring performance against objectives. For individual investors, topics include lifecycle investing, tax considerations, behavioral biases, and estate planning. Institutional investor coverage examines the unique challenges facing pension funds, endowments, foundations, and sovereign wealth funds, including liability-driven investing. Portfolio construction explores strategic vs. tactical asset allocation, passive vs. active management approaches, global diversification, alternative investments integration, and currency management. Risk management receives significant attention through discussions of VaR (Value at Risk), stress testing, scenario analysis, and attribution analysis to assess various risk exposures. Performance evaluation examines GIPS (Global Investment Performance Standards), return calculation methodologies, benchmark selection, and attribution analysis to explain sources of returns. A key differentiator of Level 3 is its case study approach, requiring candidates to synthesize information about specific client situations and develop appropriate investment solutions. The morning section of the exam features constructed response (essay) questions that test application of portfolio management concepts. Candidates must demonstrate skill in selecting appropriate investment vehicles, implementing allocation strategies given constraints, and making portfolio adjustments as client circumstances or market conditions change. The focus shifts from knowing investment tools to applying them effectively within comprehensive wealth management frameworks.

Portfolio Management at CFA Level 3 represents an advanced application of investment principles, focusing on wealth management for individual and institutional clients. This capstone topic integrates…

Concepts covered: Overview of Private Wealth Management, Topics in Private Wealth Management, Investment Manager Selection, Portfolio Management for Institutional Investors, Case Studies in Portfolio Management, Asset Allocation with Real-World Constraints, Portfolio Performance Evaluation, Principles of Asset Allocation, Trade Strategy and Execution, Risk Management for Individuals, Overview of Asset Allocation