CFA Level 3 IPS Writing

CFA Level 3 IPS Writing 讲师：吴轶 CFA FRM CQF CISI 日期：2010年5月 地点： ■上海 上海金程国际金融专修学院 1

Essay writing in level 3

Essay writing in CFA level 3

ƒ Part 1

Introduction to essay writing

ƒ Part 2 ƒ Part 3 ƒ Part 4 ƒ Part 5

专业来自百分百的投入

Individual IPS writing Institution IPS writing Beyond the IPS writing Conclusions

Copyright 2010 By GFEDU

2

Introduction to essay writing Part 1 zBehavioral Finance zIndividual Portfolio IPS zInstitutional Portfolio IPS zAsset Allocation zExecution zMonitoring & rebalancing zEvaluation & attribution

Portfolio Management and Wealth Planning (55%-65%)

Part 2

Topic Area Weights for the CFA Exam for Level Ⅲ Ethical and Professional Standards (total) ( 0, as a part of TIA •Net CF from T1 < 0, as the liquidity needs

专业来自百分百的投入

Copyright 2010 By GFEDU

11

Investor 1’s IPS - 4 ƒ Cash flow analysis … Time

T0

T1

Salary

P

P * (1+f)

Trust / Inheritance

N

0

P+N

P * (1+f)

P*t

P * (1+f) * t

Living expense

Q

Q * (1+f)

Down payment

M

0

Mortgage payment

0

MG

Donation

D

0

Other one-time need

T

0

Total outflow

P*t+Q+M+D+T

P * (1+f) * t + Q * (1+f) + MG

Net cash flow

Total in – Total out

Total in – Total out

Inflow

Total inflow

Outflow Tax

专业来自百分百的投入

Copyright 2010 By GFEDU

12

Investor 1’s IPS - 5 ƒ Return Calculation …

• Personal investor 1

•TIA •Current portfolio’s value •Net CF in at T0 •Excluding the house and other unavailable Inheritance

•Real Return

Rr = −

Net CFs at T1 TIA

•Nominal Return

Rf = −

专业来自百分百的投入

Net CFs at T1 +f TIA

Copyright 2010 By GFEDU

13

Investor 1’s IPS - 6 ƒ Risk …

• Personal investor 1 •Ability - 2i •They have a long time horizon •They are young, with more human capital •They may get inheritance in future •Their job and income are secure •Their health insurance is provided •Ability - 2d •After-tax salary can not cover living expense •Sustained Cash flows (Mortgage) must be paid •Asset base is small •Other uncertainties •Willingness •Based on “……” in the case •Overall •The narrow one dominants

专业来自百分百的投入

Copyright 2010 By GFEDU

14

Investor 1’s IPS - 7 ƒ Investment constraints …

1. Liquidity ¾The A need portfolio to provide B for next year’s C ¾

A: Name

B: Money C: Use (Mortgage pay)

2. Time horizon ¾They have a long term two – stage horizon ¾In the 1st stage, the A must pay B , and also pay C for their D ¾In the 2ed stage, they are in retirement, E years from now ¾

A: Name B: Living expense, mortgage payment …

¾

C: Education fee / health care fee D: Children / parents

¾

E: How many years from now (30)

专业来自百分百的投入

Copyright 2010 By GFEDU

15

Investor 1’s IPS - 8 ƒ Investment constraints …

3. Tax ¾The tax rate is … , the tax aspect should be considered ¾ The … ‘s tax treatment is uncertain, they need a legal counsel

4. Regulations ¾The prudent investor rule is applied ¾The … need a legal counsel to create a trust to …

5. Unique ¾The … say they do not want to invest in … ¾The … want to create a trust to care for … ¾The … want to donate … to local charity 专业来自百分百的投入

Copyright 2010 By GFEDU

16

Investor 1’s IPS - 9 ƒ Renew objectives

Main issue: Renew return objective close to retirement a.

Re-calculate the net CF need annually → PMT

b.

Re-calculate the asset base now → PV

c.

Calculate the target asset value when retire → FV

d.

Calculate the required rate of return → I/Y

New objectives: 1.

Support living expense in retirement

2.

Support donating money to charity

3.

Provide inheritance for children

专业来自百分百的投入

Copyright 2010 By GFEDU

17

Investor 1’s IPS - 10 ƒ Case analysis

1.

Case 1 – 2008 CFA level 3 morning session Q1

2.

Case 2 – 2009 CFA level 3 practice volume 1 Exam 2 morning session Q1

3.

Case 3 - 2002 CFA level 3 morning session Q5

专业来自百分百的投入

Copyright 2010 By GFEDU

18