Canadian Securities Course (CSC) Level 2 Practice Exam

What is a key step following the rebalance phase in the portfolio management process?

1. Design IPS

2. Asset mix evaluation

3. Client monitoring

4. Performance assessment

The correct answer is: Asset mix evaluation

Following the rebalance phase in the portfolio management process, the key step is asset mix evaluation. This step involves assessing the current allocation of assets in the portfolio in relation to the established investment strategy and objectives outlined in the Investment Policy Statement (IPS). During the rebalance phase, the portfolio is adjusted to realign with the target asset allocation due to changes in market values, which may have caused the portfolio to drift from its intended allocation. Once this adjustment is made, evaluating the asset mix is essential to ensure that it continues to meet the client's risk tolerance, investment goals, and market conditions. This step is critical because it allows the portfolio management team to determine if the current asset mix remains effective in achieving the desired performance, providing opportunities to make further adjustments if necessary, and ensuring that the investment strategy remains aligned with client objectives. The other options represent different aspects of the portfolio management process that occur at various stages and are important, but they do not directly follow the rebalance phase. For instance, client monitoring is typically an ongoing process, and performance assessment is often done after asset mix evaluation to understand how well the portfolio has performed against benchmarks.