CFAI Mock A - Question 6

Hi all,

i am confused with question 6 of the CFA mock:

here is the extract:

In the first Foster Asset Management board meeting after the sale, Calvin Lim, CFA, the firm’s chief investment officer (CIO), stated, “My investment team recently added real estate investment trust (REITs) to our model portfolio to see what the impact would be on investment returns for our clients if we added them to their portfolios. But this asset class has a much higher risk profile than our normal allowable assets.” Foster added, “After we analyzed the impact of adding this new asset class to our model portfolio, we made the decision to add the real estate exposure to all of our client accounts. We found it is having a positive impact on portfolio returns and still complies with the firm’s performance measurement policy.”

the solution says that Lim was in violation

but for me, he was just testing the impact of adding this new asset class to the portfolios. There should be no violation if he tests a new allocation as it may lead to presenting it to the clients who may accept this change!

what do you think?

Isn’t that Q5? And the answer is that both violated the standard - I got this wrong too- but the key was to pick up that the text states ‘we’ and that as Lim is CIO and Foster chair of the inv committee they are both responsible for suitability

very tricky

Lim was in violation because - you need to consider suitability. Even though the Real estate asset class provides a positive impact on the “model” portfolio - it cannot be applied to ALL Client accounts. It can only apply to those accounts where real estate asset class is SUITABLE.


definitely too detail oriented as you have to pick on the “we” in a sentence stated by Foster…