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Distinguishing liquidity constraints for an IPS

When a question asks to prepare the liquidity constraints for an IPS for a individual client, which of the following do we consider (or do we consider both)?

1. Withdrawals from the portfolio’s investable base in 6 months to meet some one-off large expenses, such as repayment of housing mortgage loan in full.

2. Annual living expenses, which could be funded from the portfolio’s normal returns.

Thanks in advance!

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I guess we would consider both mainly because they are both going to be funded by the portfolio.

¯\_(ツ)_/¯

there’s 2 way to approach this, but I think CFAI prefers the 2nd way

1. consider both as liquidity requirement and state it in the IPS. this would means the portfolio would have a higher return objective for the first year to fund the expense but the investable asset base is higher.

2. simply deduct the current (less than 1 year) liquidity requirements from the asset base (which will change return objective for the following year and investable asset base right away) and only consider liquidity needs for a time more than 1 year from now. the problem is whether to treat a significant expense in the future (more than 1 year from now) as liquidity requirement or goal of portfolio.

I’ve just been going through the 2009 paper. In question 1.C.i, they mention the money required to pay off the mortgage (which will be done within the next 12 months), as well as annual living expenses under liquidity constraints.

However, I was under the impression that the annual living expenses would come into the picture as part of the return requirements while, since the mortgage repayment is a one-off event, it would fall under liquidity and would come out of the investable base. 

The confusion for me is in the fact that, in the answers, the annual living expenses is mentioned as part of the return requirement AS WELL AS part of the liquidity constraints. Would it be alright to mention such recurring requirements as part of both return requirement and liquidity constraints?