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Free PDF 2025 CISI ICWIM: Updated Questions International Certificate in Wealth & Investment Management Exam

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CISI International Certificate in Wealth & Investment Management Sample Questions (Q163-Q168):

NEW QUESTION # 163
A bullet bond portfolio can have an advantage over a barbell bond portfolio because:

• A. The gross redemption yield is always higher
• B. It is always riding the yield curve
• C. A bullet portfolio does not require regular rebalancing
• D. It only invests in short-dated bonds

Answer: C

Explanation:
* Bullet Bond Portfolio
* Invests in bonds with maturities focused on a single date or time period (a "bullet").
* This structure eliminates the need for frequent adjustments as maturities naturally align with portfolio objectives.
* Barbell Bond Portfolio
* Invests in bonds with very short and very long maturities.
* Requires regular rebalancing to maintain the intended allocation, increasing transaction costs.
* Why the Answer is D
* A bullet portfolio simplifies management by focusing on a single maturity period, avoiding the complexity of rebalancing inherent in barbell strategies.
* ICWIM Study Guide, Chapter on Fixed-Income Strategies: Compares bullet and barbell portfolios.
* Bond Portfolio Management Principles: Highlights the operational advantages of bullet structures.
References

NEW QUESTION # 164
When investors wish to sell units in mutual funds, there is a risk of the fund being gated. Why might this happen?

• A. To allow fund managers to raise enough funds to pay out to those wishing to sell their units
• B. To ensure that the commission as a proportion of the fund remains small
• C. To ensure any tax deferral benefits are not lost
• D. Because the investor has not held the units past the 'lock-in' period

Answer: A

Explanation:
* Fund Gating:
* Gating occurs when fund managers temporarily restrict redemptions to protect the remaining investors and ensure liquidity.
* This allows the fund to sell illiquid assets to generate sufficient cash for redemptions.
* Elimination of Other Options:
* A: Tax deferral benefits are irrelevant to gating.
* B: Commission proportions are unrelated to liquidity.
* C: Lock-in periods are predetermined and not linked to gating.
References:
* ICWIM Module 3: Focus on fund structures and liquidity management.

NEW QUESTION # 165
How does the inclusion of a bond fund within a portfolio provide benefits over direct investing?

• A. Bond fund charges will always be lower
• B. A bond fund provides a greater level of income
• C. A bond fund is more likely to match the exact needs of the client
• D. It allows for diversification that would not otherwise be possible

Answer: D

Explanation:
Bond funds offer greater diversification than purchasing individual bonds, reducing risk exposure.
* Why is Option B Correct?
* Broad diversification # A bond fund spreads investments across multiple issuers, reducing default risk.
* Professional management # Bond fund managers actively manage interest rate risk and credit risk.
* Why Not Other Options?
* A (Greater income) # Bond funds do not always provide higher income than direct bonds.
* C (Lower charges) # Bond funds may have management fees that individual bonds do not.
* D (Exact match to client needs) # Individual bonds may be better suited for specific income needs.
# Reference: CFA Institute (Fixed Income Investing), CISI Wealth & Investment Management.

NEW QUESTION # 166
Why might a custom benchmark be required when measuring portfolio performance?

• A. To establish the size of the tracking error
• B. So that the portfolio can be measured in absolute terms
• C. It is easier than using a pre-defined benchmark
• D. The portfolio spans several different asset classes

Answer: D

Explanation:
* What is a Benchmark?
* A benchmark is a standard against which the performance of a portfolio is measured.
* Common benchmarks include stock indices like the S&P 500 or FTSE 100.
* Why a Custom Benchmark is Required
* When a portfolio spansseveral different asset classes, such as equities, fixed income, and alternative investments, a single pre-defined benchmark may not be sufficient.
* A custom benchmark aligns with the specific composition and strategy of the portfolio, ensuring that performance is evaluated accurately.
* Key Reason for Custom Benchmark
* It reflects thediversity and allocationof the portfolio across asset classes.
* Example: If a portfolio is 50% equity, 30% fixed income, and 20% real estate, the benchmark must reflect this mix, combining indices like MSCI World, Bloomberg Barclays Bond Index, and a real estate index.
* ICWIM Study Material, Chapter on Performance Measurement: Highlights the necessity for custom benchmarks in multi-asset portfolios.
* CFA Institute Standards: Custom benchmarks are required for complex portfolios spanning various classes.
ReferencesThus, the answer isD. The portfolio spans several different asset classes.

NEW QUESTION # 167
Your client estimates that they will require £40,000 of income annually to live off when they retire. Personal plus state pension will provide £35,000. They wish to retire in 20 years' time. It is estimated that they can earn
3% per annum and inflation has been forecast at 2% over the next 20 years. Interest rates are currently 1.5%.
Allowing for inflation, what lump sum would they need to accrue to supplement their pension?

• A. £165,105
• B. £495,316
• C. £331,631
• D. £247,658

Answer: C

Explanation:
* Determine the shortfall in income:
* Desired income: £40,000
* Pension provided: £35,000
* Annual shortfall: £40,000 - £35,000 = £5,000
* Adjust for inflation over 20 years:Future value = Present Value × (1 + Inflation Rate)