Every mock section 7 & 8

Positive screening

Looking for companies that do meet certain ethical or ESG standards

Portfolio turnover rate

How frequently a funds holdings are traded

Each transaction reduced returns

Independent of OCF

Top down approach

In order

• Select asset allocation

• Select sector

• Select stocks

Stochastic model for risk profiling

Recognises that the future is uncertain so it runs lots of different possible outcomes instead of assuming just one

Uses states and probabilities

Deterministic model for risk profiling

Opposite of stochastic

Assumes that if I know the input, I know exactly what the output will be

There is no randomness

Pragmatic and theoretical approach to stock selection

Pragmatic:

• do what works in the real world approach (practical)

• Fund manager isn’t tied to a particular theory

Theoretical:

• Follows an investment theory or model

• Stock selection based on academic principles

Contrarian approach to investing

Going against the trend

Would purchase securities that are unpopular

Full replicator fund

Passive fund option

Lowest tracking error of indexes

What should someone look at to see the consistency of their investments

Discrete results

Cumulative results wouldn’t work as it would hide any volatility

Tactical Allocation

Short term adjustments because the manager thinks one asset will outperform or underperform

E.g the manager thinks equities will do well over next 6 months so temporarily changes allocation

Momentum investing / section rotation

Buying securities in sectors that are likely to rise and sell once they’ve peaked

Strategic asset allocation

The long term plan

Investor decides how much they want in each asset based on clients risk, objectives, THP

Set and stick with it

Negative Screening

Avoiding companies that don’t meet your ethical criteria

If a fund has out performed its benchmark

It is possible that it is showing a loss across the respective period

Just because it’s our performing its benchmark doesn’t mean it’s showing positive returns

• They could both be down but the fund less down

Fettered and unfettered fund of funds

Fettered:

• Can only invest in funds run by its own company

Unfettered:

• Can buy funds from anyone