Chartered Investment Manager (CIM) Practice Exam · Question
A portfolio manager believes that small-cap stocks are currently undervalued relative to large-cap stocks. They decide to slightly overweight small-cap exposure in their clients' portfolios, deviating from their long-term strategic allocation. This decision is an example of:
Tactical asset allocation involves making short-term, opportunistic adjustments to a portfolio's asset class weights based on market views or economic forecasts
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Question: A portfolio manager believes that small-cap stocks are currently undervalued relative to large-cap stocks. They decide to slightly overweight small-cap exposure in their clients' portfolios, deviating from their long-term strategic allocation. This decision is an example of:
Answer options:
- Strategic Asset Allocation ✅ Tactical Asset Allocation
- Passive Portfolio Management
- Liability-Driven Investing
Correct answer: Tactical Asset Allocation
Explanation: Tactical asset allocation involves making short-term, opportunistic adjustments to a portfolio's asset class weights based on market views or economic forecasts, deviating from the long-term strategic allocation. Overweighting small-cap stocks due to perceived undervaluation is a tactical move.
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