Liquidity Q Schweser Volume 2 Exam 3 Morning Session

It’s a foundation IPS question where return requirements are 2% opex, 5% spending. 2.75% inflation, since 2% and 5% are annual real spending requirements, it seemed that they would be liquidity requirements as they’re actual cash outflows and within the year. However, the answer says “No specific liquidity needs are given. A modest cash equivalent reserve is reasonable if desired”.

Why would these not be considered liquidity needs?

Thanks for your help!

Yes I agree Kaplan omits some of the liquidity requirements.

I did the 20176Vol I AM 3 last night and Question 2B is an endowment IPS

Liquidity should for Foundation and Endowments always include the following:

  1. Spending Rule for the Current Year , can also note future liquidity of X% of assets

  2. Management Fees for Current Year, can also note future mgmt fees of X% of assets

  3. Any specific liquidity requirement unique to the problem

I don’t follow.

Question 2B from 2017 Volume 1 Morning Exam 3 is GIPS. Question 3A is Endowment IPS, but they didn’t include the spending requirement or op.ex. % in the liquidity requirement.

I could have sworn one of the questions I did had opex and spending requirements in the liquidity section, but can’t remember where that would be or if I’m just conflating info.


So I just noticed in the CFA Level III AM Mock, question 24 includes spending requirements and mgmt expenses in the liquidity section.