| 1 | Understand the fundamentals of investment theory | 1.1 | Explain the fundamentals of investment theory: - conceptualisations of risk within an investment context - investment return - risk free rate of return and the risk premium - diversification - pound cost averaging |
| 1.2 | Apply the concept of risk diversification to assessment of a client's financial circumstances, risk profile, appetite for risk and construction of a suitable client portfolio |
| 2 | Be able to compare and contrast the properties and performance of the principal asset classes held directly by clients and via intermediated investments | 2.1 | Evaluate cash as a component of a portfolio: - definition and key properties of cash - risk, price, liquidity and return - historic performance of cash |
| 2.2 | Evaluate bonds as a component of a portfolio: - definition and key properties of bonds - risk, price, value, liquidity and return - sovereign bonds (gilts) - corporate bonds - historic performance of bonds |
| 2.3 | Evaluate equities as a component of a portfolio: - definition and the key properties of equities - risk, price, value, liquidity and return - historic performance of equities |
| 2.4 | Evaluate property as a component of a portfolio: - definition and the key properties of real estate - risk, price, value, liquidity and return - historic performance of real estate |
| 3 | Be able to compare and contrast the properties and performance of alternative asset classes | 3.1 | Evaluate private equity as an asset class: - definition and the key properties of private equity - problems due to information asymmetry - risk, liquidity and return - performance of private equity |
| 3.2 | Evaluate commodities as an asset class: - definition and key properties of commodities - problems associated with particular types of commodity investment - distinguish between direct and indirect investments in commodities - performance of commodities |
| 3.3 | Evaluate infrastructure funds as an asset class: - definition and key properties of infrastructure funds - problems due to lumpiness and indivisibility - risk, liquidity and return - performance of infrastructure funds |
| 3.4 | Evaluate hedge funds as an asset class: - definition and key properties of hedge funds - unique features of hedge funds - performance of hedge funds - charges of hedge funds - benefits of fund of funds |
| 4 | Be able to evaluate property and collective investments for use in a portfolio | 4.1 | Evaluate the characteristics of property investment vehicles for use in an investment portfolio, including, for example: performance / risk / reward profiles of direct, indirect and buy to let investment approaches and appraisal methods |
| 4.2 | Evaluate the characteristics of collective investment vehicles for use an investment portfolio, for example: - key features of unit trusts, OEICs, unit-linked funds, hedge funds and offshore funds - classification and rules - performance / risk / reward profiles |
| 4.3 | Evaluate the characteristics of investment for use in an investment portfolio including, for example: - key features and types of trusts - buying and selling -NAV calculation - performance evaluation and risk/rewards profiles |
| 5 | Be able to evaluate Modern Portfolio Theory and the Capital Asset Pricing Model | 5.1 | Evaluate the uses of Modern Portfolio Theory: - the principle of diversification - the numeric application of portfolio theory - the impact of correlation upon portfolio risk - the interaction of indifference curves, the efficient frontier, and the capital market line via graphic illustration / narrative illustration - the market portfolio |
| 5.2 | Evaluate the Capital Asset Pricing Model: - using numeric illustration and narrative illustration - the use and application of betas via numeric illustration, graphic illustration and narrative illustration - assessment of the degree of diversification through R2 via numeric and narrative illustration - the limitations of CAPM and the efficient frontier |
| 6 | Be able to evaluate the concepts of behavioural finance and how it is used in the industry | 6.1 | Evaluate the concepts of behavioural finance, for example: - key properties - heuristics that help investment decisions - prospect theory - cognitive illustrations - types of trader in the market: information traders, noise traders |
| 7 | Be able to implement long term and tactical asset allocation strategies | 7.1 | Assess and select long term asset allocation strategies: - definition and key properties - implications of risk appetite - liquidity, time horizon, liabilities and religious and ethical preferences as constraints upon potential asset allocation - portfolio optimisation via numeric illustration and narrative illustration |
| 7.2 | Assess and select tactical asset allocation strategies: - definition and key properties - portfolio insurance via narrative illustration - spread measures used in tactical asset allocation via narrative illustration |
| 8 | Be able to appraise different views of market efficiency and their impact on investment style | 8.1 | Explain market efficiency: - definition and key features - random walk - informational efficiency - theory and evidence on the three classic forms of market efficiency |
| 8.2 | Determine a strategy of active equity selection: - investment styles: value, growth and growth at a reasonable rate - investment philosophy: fundamental analysis, technical analysis and quantitative analysis |
| 8.3 | Determine a strategy of passive equity selection: - indexation - duplication - stratified sampling - factor matching - co-mingling - tracking error - subjectivity with indexation |
| 8.4 | Determine a strategy of active bond selection: - duration switching - riding the yield curve - bond switching |
| 8.5 | Determine a strategy of passive bond selection: - duration matching (immunisation) - cash flow matching - horizon matching (combination) |
| 9 | Explain the role and responsibilities of fund managers | 9.1 | Explain the key areas of the fund manager's role: - investment considerations - types of client and differences in their time horizon, risk and liquidity - factors considered by sponsors when selecting a fund manager |
| 9.2 | Evaluate the different approaches to fund management: - investment strategy and style: active / passive and top down / bottom up - global and specialised fund management expertise - quantitative and qualitative based - investment research and investment decisions - responsible investment |
| 9.3 | Explain the regulatory framework influencing a fund manager's decisions: - responsibilities of Institutional Shareholders with Combined Code on Corporate Governance - Higgs Report on reporting of interaction between institutional shareholders and non-executive directors - Myners' Principles - ISC Principles |
| 10 | Be able to apply a range of techniques to measure portfolio performance | 10.1 | Apply benchmarking techniques: - peer group benchmark - customised benchmark - benchmark index |
| 10.2 | Calculate total, absolute and relative returns and include: - raw investment returns: holding period return - annualising returns of less than one year and more than one year - relative investment returns |
| 10.3 | Calculate time-weighted and money-weighted returns - via numeric illustration and narrative illustration - explain why time weighted returns are considered superior |
| 10.4 | Evaluate performance attribution: - asset allocation - stock selection - currency |
| 10.5 | Evaluate investment performance using Risk and Return: - total risk - Jensen measure - relative duration (bonds) - Sharpe ratio - M2 Measure - Treynor measure - Appraisal ratio - Information ratio |
| 11 | Be able to assess the impact of personal taxation on the investment decision-making process | 11.1 | Determine the impact of income tax on individuals: - its scope - liability - sources of income - reliefs - allowances - planning - calculation |
| 11.2 | Outline the liability of National Insurance contributions for the employer, employee and self employed worker |
| 11.3 | Identify and explain the nature of special reliefs available to individuals: - ISAs - Enterprise Investment Scheme (EIS) - Venture Capital Trusts (VCTs) - Share option schemes |
| 11.4 | Explain the nature of overseas income: - UK paying agents - types of income - withholding taxes - double taxation agreements - basic calculations |
| 11.5 | Establish the scope of family tax planning: - allowances - reliefs - planning |
| 11.6 | Establish the scope of inheritance tax: - its calculation - exemptions and reliefs - allowances - administration of estates - planning |
| 11.7 | Contrast tax avoidance with tax evasion |
| 11.8 | Provide an outline of VAT and corporation tax |
| 12 | Be able to assess the impact of SDLT / SDRT on the investment decision-making process | 12.1 | Determine the nature of chargeable securities: - their scope - liability - rates - relief and exemptions - accountable persons - planning |
| 12.2 | Assess the application of stamp duty on unit trusts |
| 13 | Be able to determine the tax treatment of On-Shore and Offshore funds | 13.1 | Explain the taxation of unit trusts and unauthorised unit trusts: - ISAs - Qualified Investor Schemes (QIS) |
| 13.2 | Explain the taxation of OEICS and Investment Companies with Variable Capital (ICVCs) |
| 13.3 | Explain the taxation of offshore funds: - distributor and non-distributor status - uses of offshore funds - planning |
| 14 | Be able to determine the scope of international taxation and tax planning strategies | 14.1 | Explain concepts of residence, ordinary residence and domicile: - remittance basis of taxation - planning - basic calculations |
| 14.2 | Explain overseas aspects of income tax, capital gains tax and inheritance tax: allowances and reliefs (basic calculations) |
| 15 | Be able to compare the different types of trusts, how they are taxed and the rights of beneficiaries | 15.1 | Explain the characteristics and uses of trusts including, for example: - concepts of settlor, beneficiary and trustee - express, resulting and constructive trusts - investment powers of trustees - Trustee Act 2000 - tax and estate planning |
| 15.2 | Explain the basic law of contract and agency, wills and intestacy and the concept of legal persons and related powers of attorney |
| 15.3 | Distinguish between the following types of trust: - Bare Trusts - Interest-in-possession trusts (Life Interest and Revisionary Interest) - Non-interest-in-possession trust (accumulation and maintenance trusts / discretionary trusts) - charitable trusts |
| 15.4 | Specify the tax implications of trusts, for example: - income tax - capital gains tax - inheritance tax |
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