CISI Updated ICWIM Exam Questions and Answers by jade

Return on Capital Employed (ROCE) measures how efficiently a company uses its capital to generate profits.

Formula: ROCE=Operating ProfitCapital Employed×100ROCE = \frac{\text{Operating Profit}}{\text{Capital Employed}} \times 100ROCE=Capital EmployedOperating Profit​×100

Why Use ROCE?

It helps in comparing performance over time (trend analysis).

Investors use it to assess capital efficiency.

Why Not Option D?

ROCE evaluates total capital (equity + debt), while Return on Equity (ROE) focuses only on shareholders' equity.

???? Reference: CFA Institute (Financial Ratios), CISI Wealth & Investment Management.

Opportunistic property funds target higher-risk, higher-return strategies and typically seek mispriced, complex, or distressed situations. A common opportunity set is acquiring assets from distressed sellers, such as forced sales, refinancing pressure, or owners needing rapid liquidity. These funds may buy at discounted prices and then aim to create value through major repositioning, redevelopment, significant refurbishment, changes in tenant mix, or restructuring of the asset’s capital structure. Value-added funds also undertake improvement and re-letting strategies, but they usually focus on moderate risk assets with identifiable enhancements rather than the most distressed and complex situations. The “fire sale” and “repossession” labels are not standard fund strategy categories used in professional property fund classification and are included as distractors. In exam terms, distressed acquisitions are most closely associated with opportunistic strategies, which accept greater uncertainty and may use higher leverage in pursuit of stronger returns.

A quote-driven market relies on market makers who continuously provide bid and ask prices for securities.

Key Characteristics of Quote-Driven Markets:

Market makers buy and sell securities from their own inventory, ensuring liquidity.

Prices are set by market makers rather than by matching buy and sell orders.

Common in less liquid markets (e.g., corporate bonds, some equities).

Examples:

The London Stock Exchange’s SEAQ system operates as a quote-driven market.

Why Not Other Options?

A (Order-driven) → Uses an electronic order book, not market makers.

C (On-exchange) → Both quote-driven and order-driven systems exist on exchanges.

D (Over-the-counter) → OTC markets may have market makers, but they are not exclusively quote-driven.

???? Reference: London Stock Exchange Trading Systems, CISI Wealth & Investment Management.

A discretionary investment manager has full authority to buy and sell investments without seeking client approval for each transaction.

Why is Option C Correct?

The manager follows a pre-agreed investment mandate that aligns with the client’s objectives and risk profile.

Common in wealth management and private banking.

Why Not Other Options?

A (Execution-only) → The firm executes trades but does not provide investment advice or management.

B (Advisory dealing) → The manager provides advice, but the client makes the final decision.

D (Financial planning) → Financial planning involves long-term wealth strategies, not active portfolio management.

???? Reference: FCA Conduct of Business Rules (COBS 9 - Discretionary Management), CISI Wealth & Investment Management.