Which of the following items would not generally be addressed when constructing an investment policy?
A.The required rate of return expected for the risk thats being taken
B.Credit Rating above which securities may be considered
C.Allowable margins within which the manager may deviate from the original asset mix
Can anyone please explain why the Answer is A?Isnt required rate of return a absolute return objective mentioned in the IPS?
I suggest reviewing Section 2.2. of Reading 45 in regard to major components of an IPS. While a PM could certainly exclude securities below a certain credit rating (investment constraints) and specify an acceptable level of margin (investment constraints), there is no way that he could guaranty a particular rate of return, given a level of risk.
Note that this is different than specifying the level of risk that may be taken within the portfolio, which would certainly be part of an IPS.