ICWIM Exam Dumps - International Certificate in Wealth & Investment Management

Need for a Composite Benchmark:

Portfolios that span multiple asset classes (e.g., equities, bonds, commodities) require a composite benchmark to provide a fair performance comparison.

Single benchmarks (e.g., S&P 500) would not accurately represent multi-asset portfolios.

Elimination of Other Options:

A: Composite benchmarks complicate fund management rather than simplify it.

C: While portfolios are part of the investment universe, this does not necessitate a composite benchmark.

D: Reducing tracking error is a goal but not the main reason for composite benchmarks.

References:

ICWIM Module 3: Details on portfolio management and benchmark selection for performance measurement.

Know Your Customer (KYC) Principle:

Advisers must gather extensive client information (e.g., financial goals, risk tolerance, income) to provide tailored recommendations.

KYC ensures compliance with regulatory frameworks and aligns investment strategies with client needs.

Elimination of Other Options:

A: Disclosure focuses on transparency of fees and risks, not information gathering.

B: Transparency of trading pertains to market operations, not advisory practices.

C: Risk reduction is a goal, not a principle requiring client data.

References:

ICWIM Module 4: Ethical and Regulatory Practices: Focus on the KYC framework.

Fiduciary Duty:

A fiduciary is legally and ethically bound to prioritize the client’s best interests above all else, ensuring transparency, loyalty, and care in decision-making.

Elimination of Other Options:

A: Reducing risk is important but not the primary fiduciary responsibility.

B: Competitive fees are desirable but not a fiduciary obligation.

D: Offering conservative advice is situational and based on client needs, not a fiduciary mandate.

References:

ICWIM Module 4: Coverage of fiduciary duties in financial advising.

Global Currency Trading

The US dollar dominates the foreign exchange market due to its status as the global reserve currency.

It is heavily used in international trade, financial transactions, and as a benchmark currency.

Market Share

The US dollar is involved in approximately88% of all forex trades.

Other currencies like the euro, Japanese yen, and British pound have significant market shares but are far behind the US dollar.

ICWIM Study Guide, Chapter on Global Financial Markets: Highlights the US dollar as the most traded currency.

Bank for International Settlements (BIS)Forex Market Surveys: Confirms trading dominance of the US dollar.

References

Double Taxation Relief (DTR) is a mechanism to prevent individuals or companies from paying tax on the same income in two different jurisdictions. This is critical for taxpayers with international earnings or investments. The relief is typically provided under double taxation agreements (DTAs) between countries.

Modern Portfolio Theory (MPT) and the Efficient Frontier

The efficient frontier represents portfolios that offer thehighest return for a given level of risk.

Portfolios below the frontier areinefficientbecause they providelower returns for the same level of riskorhigher risk for the same level of return.

Why the Answer is D

Portfolios below the efficient frontier are suboptimal; the investor is not maximizing return relative to the risk taken.

ICWIM Study Guide, Chapter on Portfolio Theory: Discusses the efficient frontier and inefficiency of suboptimal portfolios.

MPT Literature: Explains risk-return optimization.

References

Understanding Bullet Payments:

A bullet payment is a single payment of principal and interest at maturity.

Zero coupon bonds do not provide periodic interest payments, making them associated with bullet payments.

Elimination of Other Options:

A: Treasury bonds typically pay semiannual interest.

C: Convertible bonds may have periodic interest.

D: Premium bonds involve prize draws, not bullet payments.

References:

ICWIM Module 3: Coverage of fixed income securities and payment structures.

Fund Gating:

Gating occurs when fund managers temporarily restrict redemptions to protect the remaining investors and ensure liquidity.

This allows the fund to sell illiquid assets to generate sufficient cash for redemptions.

Elimination of Other Options:

A: Tax deferral benefits are irrelevant to gating.

B: Commission proportions are unrelated to liquidity.

C: Lock-in periods are predetermined and not linked to gating.

References:

ICWIM Module 3: Focus on fund structures and liquidity management.