AIF COMPREHENSIVE STUDY GUIDE
2026 FULL QUESTIONS AND
SOLUTIONS GRADED A+
◍ All available safe harbors: Were enacted prior to 2006 Are voluntaryRequire
legal approval Protect the fiduciary from liability.
Answer: Are Voluntary
◍ During an investment committee meeting as part of the monitoring process,
the most significant responsibility of the committee is to: Formulate and
address the call to action Verify performance reports Review custodial
statements Ensure that the record keeper is paid.
Answer: Formulate and address the call to action
◍ Advantages to a corporation.
Answer: Limited liabilityUnlimited lifeAbility to raise capital
◍ When setting the upper and lower limits that would trigger a rebalancing
decision, consideration should be given to: What is the current interest rate
Whether the client is a foundation/endowment or a high net worth individual
Keeping the client aligned with their risk/return profile How often periodic
client/advisor meetings are held.
Answer: Keeping the client aligned with their risk/return profile
◍ All of the following are true of the policy portfolio EXCEPT: It is focused
on Alpha It should always be reflected in the Investment Policy Statement
Ideally, it is used to model a portfolio that will allow portfolio principal and
returns to meet projected liabilities It relates to asset allocation based upon
efficient markets.
Answer: It is focused on Alpha
◍ IAA.
, Answer: INVESTMENT ADVISOR ACT OF 1940this is a federal
securities law that governs the regulation of advisors and their fiduciary
responsibilities.-adminstered by the SEC who issues regulations and
guidance affecting thee advisors and their responsibilities.
◍ All of the following are provisions of the core (or general) "safe harbor" that
applies to ERISA retirement plans EXCEPT: Prudent experts must not be
given discretion over the management of the investments Prudent experts
must be selected by a prudent due diligence process The plan fiduciary must
monitor the activities of prudent experts to assure they are performing the
roles for which they were selected Prudent experts must acknowledge their
fiduciary status in writing.
Answer: Prudent experts must not be given discretion over the management
of the investments
◍ duty of loyalty.
Answer: best interest of client,act in good fath, avoide conflict
◍ 1/n phenomena.
Answer: a majority of investors will evenly distribute their allocation across
available assets. The fewer the investments, the greater the odds
◍ The Seven Global Fiduciary Precepts include Control and account for
investment expenses Avoid conflicts of interest and prohibited transactions
Prepare investment policy statement All of the above.
Answer: All of the above
◍ What legislation requires investments to be managed solely in the best
interests of the participants/beneficiaries?MPERS UPIA ERISA All of the
above.
Answer: All of the Above
◍ The capital markets inputs, or optimizer variables, include:Correlation
coefficient Manager tenure The Sharpe ratioAll of the above.
Answer: Correlation coefficient
◍ Sole proprietorship and Partnership advantages.
, Answer: Easy to formNo double taxationMore owner involvement
◍ What are four reasons for capital investment.
Answer: Replacement of worn out or unproductive
equipmentExpansionAdvancements in technologyCompliance with
government mandates
◍ Optimizer Variables.
Answer: 1. Expected Return2. Standard Deviation3. Correlation Coefficient
◍ Disadvantages to a corporation.
Answer: Double taxationRegulatory requirements
◍ WHAT IS THE DISTRIBUTION REQUIREMENT FOR PRIVATE NON
OPERATING FOUNDATIONS?.
Answer: 5%
◍ The Seven Global Fiduciary Precepts include: Control and account for
investment expenses Avoid conflicts of interest and prohibited transactions
Prepare investment policy statement All of the above.
Answer: All of the above
◍ Legislation underlying the Practices indicates that
U. S. Courts should have access to investment assets in the event there are
egregious violations of fiduciary responsibility. TrueFalse.
Answer: True
◍ UPMIFA Requirements.
Answer: Private foundations - 5% spending requirement and a controlled
boardPublic foundations - board has outside directorsCan be a trust or
corporation as long as a charity acts as trustee on trust
◍ erisa 404c safe harbor.
Answer: protects the plan sponsor from liability for actions of the
participants
◍ erisa eiaa safe harbor.
Answer: protects the plan sponsor from liability for investment advice
2026 FULL QUESTIONS AND
SOLUTIONS GRADED A+
◍ All available safe harbors: Were enacted prior to 2006 Are voluntaryRequire
legal approval Protect the fiduciary from liability.
Answer: Are Voluntary
◍ During an investment committee meeting as part of the monitoring process,
the most significant responsibility of the committee is to: Formulate and
address the call to action Verify performance reports Review custodial
statements Ensure that the record keeper is paid.
Answer: Formulate and address the call to action
◍ Advantages to a corporation.
Answer: Limited liabilityUnlimited lifeAbility to raise capital
◍ When setting the upper and lower limits that would trigger a rebalancing
decision, consideration should be given to: What is the current interest rate
Whether the client is a foundation/endowment or a high net worth individual
Keeping the client aligned with their risk/return profile How often periodic
client/advisor meetings are held.
Answer: Keeping the client aligned with their risk/return profile
◍ All of the following are true of the policy portfolio EXCEPT: It is focused
on Alpha It should always be reflected in the Investment Policy Statement
Ideally, it is used to model a portfolio that will allow portfolio principal and
returns to meet projected liabilities It relates to asset allocation based upon
efficient markets.
Answer: It is focused on Alpha
◍ IAA.
, Answer: INVESTMENT ADVISOR ACT OF 1940this is a federal
securities law that governs the regulation of advisors and their fiduciary
responsibilities.-adminstered by the SEC who issues regulations and
guidance affecting thee advisors and their responsibilities.
◍ All of the following are provisions of the core (or general) "safe harbor" that
applies to ERISA retirement plans EXCEPT: Prudent experts must not be
given discretion over the management of the investments Prudent experts
must be selected by a prudent due diligence process The plan fiduciary must
monitor the activities of prudent experts to assure they are performing the
roles for which they were selected Prudent experts must acknowledge their
fiduciary status in writing.
Answer: Prudent experts must not be given discretion over the management
of the investments
◍ duty of loyalty.
Answer: best interest of client,act in good fath, avoide conflict
◍ 1/n phenomena.
Answer: a majority of investors will evenly distribute their allocation across
available assets. The fewer the investments, the greater the odds
◍ The Seven Global Fiduciary Precepts include Control and account for
investment expenses Avoid conflicts of interest and prohibited transactions
Prepare investment policy statement All of the above.
Answer: All of the above
◍ What legislation requires investments to be managed solely in the best
interests of the participants/beneficiaries?MPERS UPIA ERISA All of the
above.
Answer: All of the Above
◍ The capital markets inputs, or optimizer variables, include:Correlation
coefficient Manager tenure The Sharpe ratioAll of the above.
Answer: Correlation coefficient
◍ Sole proprietorship and Partnership advantages.
, Answer: Easy to formNo double taxationMore owner involvement
◍ What are four reasons for capital investment.
Answer: Replacement of worn out or unproductive
equipmentExpansionAdvancements in technologyCompliance with
government mandates
◍ Optimizer Variables.
Answer: 1. Expected Return2. Standard Deviation3. Correlation Coefficient
◍ Disadvantages to a corporation.
Answer: Double taxationRegulatory requirements
◍ WHAT IS THE DISTRIBUTION REQUIREMENT FOR PRIVATE NON
OPERATING FOUNDATIONS?.
Answer: 5%
◍ The Seven Global Fiduciary Precepts include: Control and account for
investment expenses Avoid conflicts of interest and prohibited transactions
Prepare investment policy statement All of the above.
Answer: All of the above
◍ Legislation underlying the Practices indicates that
U. S. Courts should have access to investment assets in the event there are
egregious violations of fiduciary responsibility. TrueFalse.
Answer: True
◍ UPMIFA Requirements.
Answer: Private foundations - 5% spending requirement and a controlled
boardPublic foundations - board has outside directorsCan be a trust or
corporation as long as a charity acts as trustee on trust
◍ erisa 404c safe harbor.
Answer: protects the plan sponsor from liability for actions of the
participants
◍ erisa eiaa safe harbor.
Answer: protects the plan sponsor from liability for investment advice
