Exam ICWIM Topic 1 Question 50 Discussion
Actual exam question for CISI's ICWIM exam
Question #: 50
Topic #: 1
Question #: 50
Topic #: 1
A fund manager would be keen to improve the alpha of a fund because:
Suggested Answer: A Vote an answer
Alpha (#) measures a fund's excess return relative to its benchmark. A positive alpha indicates outperformance, while a negative alpha means underperformance.
* Why is Option A Correct?
* A fund manager aims to improve alpha to outperform the benchmark (e.g., S&P 500, FTSE
100).
* If a fund's alpha is negative, it has not beaten the benchmark, indicating poor active management.
* Why Not Other Options?
* B (Easier to manage) # A high-alpha strategy often requires active management, which can be complex.
* C (Improves beta) # Alpha is independent of beta (systematic risk).
* D (Attractive to risk-averse clients) # High alpha does not necessarily mean low risk.
# Reference: CFA Institute (Alpha & Beta), CISI Wealth & Investment Management.
* Why is Option A Correct?
* A fund manager aims to improve alpha to outperform the benchmark (e.g., S&P 500, FTSE
100).
* If a fund's alpha is negative, it has not beaten the benchmark, indicating poor active management.
* Why Not Other Options?
* B (Easier to manage) # A high-alpha strategy often requires active management, which can be complex.
* C (Improves beta) # Alpha is independent of beta (systematic risk).
* D (Attractive to risk-averse clients) # High alpha does not necessarily mean low risk.
# Reference: CFA Institute (Alpha & Beta), CISI Wealth & Investment Management.
by Jim at Dec 24, 2025, 10:57 AM
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