Not really. I think ERISA and UMIFA trumps any state law. For insurance companies state law is key, very few federal laws. For non life have to abide by NAIC to maintain AVR
the 1% tax (if you don´t spend 5%) is page 324, cfa texts, book 2 the prudent word is mentioned in some schweser and cfa examples / end of chapter / previous exams prudent expert… no idea. I guess is the same as prudent investor rules, because the trustees some sort of fiduciary duty to the founders / supporters of the endowment / foundation and to the social activity they are supporting. More important in the case def.benefit plans or life insurance…
hala_madrid Wrote: ------------------------------------------------------- > the 1% tax (if you don´t spend 5%) is page 324, > cfa texts, book 2 > > the prudent word is mentioned in some schweser and > cfa examples / end of chapter / previous exams > > prudent expert… no idea. I guess is the same as > prudent investor rules, because the trustees some > sort of fiduciary duty to the founders / > supporters of the endowment / foundation and to > the social activity they are supporting. More > important in the case def.benefit plans or life > insurance… so it is 1% tax if you dont spend 5%? i thought it is 1+1% if you dont spend 5
yes, sorry, my wording was confusing: is 2%, and reduced to 1% if you spend 5%
hala, any examples where 1% actually used? i never saw it used anywhere
not a single one in the whole list of cfa examples, cfa previous exams, end of chapter questions, schweser texts and schweser exams vol1 and vol2… great
so i go with multiplicative rule of 3 components and be done with it. we are not required to be tax experts like Wesley Snipes
agree actuallyi would not worry a lot about this. i think they will (for sure) put a question on a foundation or endowment, and what they will ask is return calculation, and we will have to write return, risk, liquidity… and nothing else. I think the other ones (legal and regulatory, tax, time horizon, etc) will be in the individual invesor IPS question that we will face
bump
Props on the bump. This one warrants a bookmark
nice. thanks.
this is pretty comprehensive, thanks!
How do you book mark it ?
Bump for the final stretch.
Great summary.
Hala - we owe you.
Here are some canned returned objectives I’m planning to use as well. Your thoughts are appreciated, AF community. Life Insurance Primary: Fund future policy holder benefits and claims 1) Min return set by actuaries based on mortality rates 2) Enhanced Margin – spread management above crediting, max interest earned over crediting rate 3) Surplus Focus on growth, use equity investments in real estate, VC and taxable account Bank Earn a positive interest spread between average yield of assets (loans) and the cost of interest bearing liabilities (deposits) Seek loan interest > Deposit interest Non-Life The XYZ Corp should pursue a total return objective that maximizes the ability to maintain a competitive pricing policy, reduce volatility in overall profitability and achieve reasonable growth in surplus. Endowments The goal of the Endowment is to provide significant annual distribution to support the organizations programs while maintaining the fund’s purchasing power with a spending rate of ___, net of investment management expenses and the portfolio must generate a long-term return greater than the broad measure of inflation (or the rate for the schools itself if needed) Foundations To preserve the real, inflation-adjusted value of investment assets while allowing spending at appropriate levels. DB Plans The overall return objective is to achieve a return sufficient to achieve funding adequacy on an inflation-adjusted basis.
^ Looks good FastEd
How come we have the multiplicative rule for foundations (spending times mgmt fee times inflation) but additional for endowment? Or should both be multiplicative? Thanks.
For Non Life and Commercial Banks is there any Prudent Investor Rule applied? ???