Mandate

The stated strategy, benchmark and constraints a manager has agreed to run money to. Others build their allocations on it, so departing from it, even for a better idea, breaks the agreement.

Where you will meet it

Mandate appears in 21 learning outcomes on the CFA syllabus. A few of them:

• Put the Suitability standard, III(C), into practice
  CFA Level I · Ethical and Professional Standards

  “Where the member manages to a stated mandate or index rather than for an individual, suitability is assessed against that mandate, and a manager may not depart from it because they judge another strategy better.”

• Explain what security market indexes are used for
  CFA Level I · Equity Investments

  “Choosing an index because it is familiar rather than because it matches the mandate is a common and costly error.”

• Explain the risk measures built into equity portfolio construction and how caps on them alter the portfolio
  CFA Level III · Portfolio Management Pathway

  “The trap is setting limits that are inconsistent with the alpha target, so the mandate cannot realistically meet its return objective.”

• Design a suitable currency management programme in light of market conditions and the portfolio's objectives and constraints
  CFA Level III · Derivatives and Risk Management

  “The trap is letting a tactical view override the mandate's limits.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with M · Glossary