Fifteen questions, and the chapter where the earlier statistics turn into portfolio decisions. It is also the most theory heavy part of the syllabus, with four named models to keep apart.
The time value of money, returns from different asset classes, the risk free rate and the risk premium, how risk is measured, the significance and the limits of standard deviation, and total return with beta and alpha.
Modern Portfolio Theory and the Efficient Markets Hypothesis, the assumptions and limitations of CAPM, the main principles of Arbitrage Pricing Theory, and behavioural finance including heuristics and prospect theory.
Active, passive and core satellite. Top down and bottom up. Bond strategies. The use of different asset classes and of funds within a portfolio. ESG considerations are a named objective in their own right.
Benchmarking, performance attribution, money weighted against time weighted returns, and the risk adjusted measures: Sharpe, Sortino, Treynor and maximum drawdown.
A short revision checklist built from the official syllabus and from the explanations in our own question bank. Use it to check yourself after studying the chapter. It does not replace the official workbook, and it is not a prediction of what any exam will contain. Unfamiliar term? See the glossary.
The published examination specification allocates 15 of the 100 questions to this element. CISI notes the count may vary slightly between papers, so treat 15 as the weighting rather than a guarantee. Our bank holds 180 questions across the 17 learning objectives in this chapter, weighted to that same specification.
These are not predictions about any exam. They are places where the syllabus itself draws a line between two things that sound similar, which is where precise reading pays.
Money weighted is affected by when the client paid money in. Time weighted removes that, which is why it is used to judge the manager rather than the client outcome.
Sharpe divides excess return by total volatility. Treynor divides by beta, so it only considers market risk. Sortino looks only at downside deviation. Questions turn on which risk each one is measuring.
Beta is sensitivity to the market. Alpha is what is left after accounting for it.
The syllabus asks for the importance and limitations of past performance data. A question offering past returns as evidence of future skill is usually testing the limitation.
The objective names assumptions and limitations, not just the formula.
1 of the 25 Formula Lab lessons cover Chapter 6, across portfolio performance. Each lesson gives you the recognition cue that tells you which formula a question wants, the formula itself, the method in order, a worked example, a sense check for spotting an answer that is wrong by a factor or a sign, and its drills. The drills run the formulas backwards as well as forwards.
The theory in this chapter is easy to recognise and hard to keep apart, which is exactly what practice is for. Filter to Chapter 6 and watch which of Sharpe, Treynor and Sortino you reach for by reflex. The explanation on a wrong answer names the risk each one measures, which is the distinction the question was actually testing.
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