AIF TRAINING UPDATED ACTUAL EXAM PAPER
2026 QUESTIONS WITH SOLUTIONS GRADED
A+
◉ Define Fiduciary. Answer: A fiduciary is someone who: manages
property for the benefit of another; exercises discretionary authority or
control over assets; and/or acts in a professional capacity of trust and
renders comprehensive and continuous investment advice. FYI - A
custodian does not perform any of these roles
◉ What are the reasons to revisit service agreements at least every 3
years?. Answer: 1. Vendor's product offering may have expanded
2. Fees may be reduced
3. Scope of require services may have expanded
The is best practice, not an ERISA (fiduciary) requirement
◉ What are the benefits of a CEFEX assessment?. Answer: 1. It
provides a "checklist" approach, which imparts a discipline and rigor to
an investment decision-making process
2. It may help to educate fiduciaries of their role and responsibilities
3. It leads to the recognition and correction of shortfalls to current
investment practices, which may reduce liability.
,Note: it is not designed as a fault-finding exercise
◉ An investment advisor must take discretion of the investment assets in
order to provide comprehensive and continuous investment advice. T or
F. Answer: False - An investment advisor need not take discretion in
order to provide comprehensive and continuous investment advice.
◉ Who would normally be considered a fiduciary?. Answer: 1. A
professional providing comprehensive and continuous advice
2. Trustee of a private trust
3. Someone with discretion to buy and sell investable assets.
Note: A stock broker/registered representative is not considered a
fiduciary
◉ Regulatory Oversight is primarily provided by State Attorney General
under which pieces of legislation. Answer: 1. UPIA
2. UPMIFA
3. UMPERSA
Note: Taft-Hartley plans are governed by ERISA, which falls under the
oversight responsibility of the DOL, IRS and PBGC.
◉ 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. T or F. Answer: True - Practice 1.6
reads, "Clients assets are protected from theft and embezzlement."
,Because all of the Practices are substantiated by legislation, you can
infer that the statement is correct.
◉ A fiduciary or co-fiduciary cannot be held responsible for a breach of
their fiduciary responsibility if they can demonstrate they were not
aware of a particular duty or requirement. T or F. Answer: F - Ignorance
is not a viable defense.
◉ Expected returns are uncertain. Under the normal distribution curve,
approximately 95% of the expected returns fall within one standard
deviation of the mean. T or F.. Answer: False - Under the normal
distribution curve, one standard deviation encompasses 66% of the
sample and two standard deviations encompass 95% of the sample. Thus
, a portfolio with an expected return of 8% and standard deviation of
17% could be expected to have a return of less than -9% or more than
25% in approximately 3 years out of 9.
◉ The most widely used estimate of absolute risk is?. Answer: Standard
deviation - Alpha and the Sharpe Ratio are measures of risk-adjusted
return. Beta is a measure of market risk. Standard deviation is the most
widely accepted measure of absolute risk.
◉ All of the following are true of the policy portfolio EXCEPT:
1. It relates to asset allocation based upon efficient markets
2. It should always be reflected in the Investment Policy Statement (IPS)
, 3. Ideally, it is used to model a portfolio that will allow portfolio
principal and returns to meet projected liabilities.
4. It is focused on Alpha. Answer: 4. The policy portfolio is contrasted
with the pricing portfolio. The policy portfolio establishes the asset
allocation that should be reflected in all Investment Policy Statements.
Ideally, a well crafter policy portfolio is effective in meeting projected
liabilities. The policy portfolio does not address the possibility that
managers can outperform on risk adjusted return bases; therefore, Alpha
is not considered in the policy portfolio. Risk, as measured by Beta, is a
focal point of the policy portfolio. Alpha is the focus of the pricing
portfolio.
◉ All of the following are decisive factors to consider when analyzing
the number of asset classes to include in a portfolio EXCEPT:
1. Portfolio size
2. Investment expertise of decision-makers
3. Existing brokerage platform limitations
4. Ability of decision-makers to properly monitor investments. Answer:
3. All else being equal: the larger the portfolio size, the more asset
classes that should be available; the greater the investment expertise of
the decision makers, the more asset classes that should be available; and
lastly, the greater the ability to monitor the investments, the more assets
classes that should be available. Brokerage platform should not be a
deciding factor on the number of asset classes because if a particular
platform cannot accommodate the required asset classes, it is likely that
another platform could. The fiduciary should assure the platform meets
2026 QUESTIONS WITH SOLUTIONS GRADED
A+
◉ Define Fiduciary. Answer: A fiduciary is someone who: manages
property for the benefit of another; exercises discretionary authority or
control over assets; and/or acts in a professional capacity of trust and
renders comprehensive and continuous investment advice. FYI - A
custodian does not perform any of these roles
◉ What are the reasons to revisit service agreements at least every 3
years?. Answer: 1. Vendor's product offering may have expanded
2. Fees may be reduced
3. Scope of require services may have expanded
The is best practice, not an ERISA (fiduciary) requirement
◉ What are the benefits of a CEFEX assessment?. Answer: 1. It
provides a "checklist" approach, which imparts a discipline and rigor to
an investment decision-making process
2. It may help to educate fiduciaries of their role and responsibilities
3. It leads to the recognition and correction of shortfalls to current
investment practices, which may reduce liability.
,Note: it is not designed as a fault-finding exercise
◉ An investment advisor must take discretion of the investment assets in
order to provide comprehensive and continuous investment advice. T or
F. Answer: False - An investment advisor need not take discretion in
order to provide comprehensive and continuous investment advice.
◉ Who would normally be considered a fiduciary?. Answer: 1. A
professional providing comprehensive and continuous advice
2. Trustee of a private trust
3. Someone with discretion to buy and sell investable assets.
Note: A stock broker/registered representative is not considered a
fiduciary
◉ Regulatory Oversight is primarily provided by State Attorney General
under which pieces of legislation. Answer: 1. UPIA
2. UPMIFA
3. UMPERSA
Note: Taft-Hartley plans are governed by ERISA, which falls under the
oversight responsibility of the DOL, IRS and PBGC.
◉ 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. T or F. Answer: True - Practice 1.6
reads, "Clients assets are protected from theft and embezzlement."
,Because all of the Practices are substantiated by legislation, you can
infer that the statement is correct.
◉ A fiduciary or co-fiduciary cannot be held responsible for a breach of
their fiduciary responsibility if they can demonstrate they were not
aware of a particular duty or requirement. T or F. Answer: F - Ignorance
is not a viable defense.
◉ Expected returns are uncertain. Under the normal distribution curve,
approximately 95% of the expected returns fall within one standard
deviation of the mean. T or F.. Answer: False - Under the normal
distribution curve, one standard deviation encompasses 66% of the
sample and two standard deviations encompass 95% of the sample. Thus
, a portfolio with an expected return of 8% and standard deviation of
17% could be expected to have a return of less than -9% or more than
25% in approximately 3 years out of 9.
◉ The most widely used estimate of absolute risk is?. Answer: Standard
deviation - Alpha and the Sharpe Ratio are measures of risk-adjusted
return. Beta is a measure of market risk. Standard deviation is the most
widely accepted measure of absolute risk.
◉ All of the following are true of the policy portfolio EXCEPT:
1. It relates to asset allocation based upon efficient markets
2. It should always be reflected in the Investment Policy Statement (IPS)
, 3. Ideally, it is used to model a portfolio that will allow portfolio
principal and returns to meet projected liabilities.
4. It is focused on Alpha. Answer: 4. The policy portfolio is contrasted
with the pricing portfolio. The policy portfolio establishes the asset
allocation that should be reflected in all Investment Policy Statements.
Ideally, a well crafter policy portfolio is effective in meeting projected
liabilities. The policy portfolio does not address the possibility that
managers can outperform on risk adjusted return bases; therefore, Alpha
is not considered in the policy portfolio. Risk, as measured by Beta, is a
focal point of the policy portfolio. Alpha is the focus of the pricing
portfolio.
◉ All of the following are decisive factors to consider when analyzing
the number of asset classes to include in a portfolio EXCEPT:
1. Portfolio size
2. Investment expertise of decision-makers
3. Existing brokerage platform limitations
4. Ability of decision-makers to properly monitor investments. Answer:
3. All else being equal: the larger the portfolio size, the more asset
classes that should be available; the greater the investment expertise of
the decision makers, the more asset classes that should be available; and
lastly, the greater the ability to monitor the investments, the more assets
classes that should be available. Brokerage platform should not be a
deciding factor on the number of asset classes because if a particular
platform cannot accommodate the required asset classes, it is likely that
another platform could. The fiduciary should assure the platform meets
