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Lorenzo Edwards, CFA, is a member of the board of trustees for the Waldrop Enterprise pension fund. He was instrumental in the hiring of Dora Ray, CFA, as lead manager of the fund 5 years ago. During her tenure, Ray's long-term performance has been solid. The record shows that the fund has outperformed the relevant composite benchmark by 62 basis points, on average, during the period. Last quarter, she purchased shares of Baseco which proceed to fall sharply in value and brought down the overall performance of the fund. The board is now asking Edwards what has gone wrong. Which of the following is most correct with regard to the situation at Waldrop pension fund? A. Edwards should tell the board that under the Prudent Man Rule, the investment risk for Baseco must be evaluated in a portfolio context, and not on a standalone basis. B. Edwards should tell the board that even though the Baseco investment did not perform as expected, there is no evidence that the Prudent Investor Rule has been violated. C. As a CFA Charterholder, Edwards’ delegation of investment authority to Rey is in violation of the Code and Standards. |