The major requirements of a portfolio manager include the following, EXCEPT
A) follow the client's policy statement.
B) completely diversify the portfolio to eliminate all unsystematic risk.
C) the ability to derive above-average risk adjusted returns.
D) completely diversify the portfolio to eliminate all systematic risk.
E) deliver on expectations and produce an additional alpha component.

Question

Quizplus · Accepted Answer

Diversification can reduce or eliminate unsystematic risk (also known as diversifiable or idiosyncratic risk), which is specific to a particular company or industry. However, systematic risk (also known as market risk or non-diversifiable risk) affects the entire market and cannot be eliminated through diversification.

The Major Requirements of a Portfolio Manager Include the Following