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CFA Level 3
Ethical and Professional Standards

Ethical Investment Dilemma for Portfolio Manager

Hard Ethical Decision-making Investment Analysis

James, a portfolio manager at a reputable investment firm, is analyzing two potential investments: Company A and Company B. Company A has been underperforming, but James believes it possesses long-term potential due to a new product line that could revolutionize its market sector. Company B, on the other hand, has shown consistent growth, but James' clients express a desire to invest in sustainable companies, and Company B has been criticized for its environmental practices.

James faces a dilemma: his fiduciary duty is to act in the best interests of his clients, balancing between maximizing returns and adhering to ethical investment principles. He contemplates recommending Company A to cater to the social responsibility desires of his clients while ignoring signals from performance metrics that suggest it’s a high-risk venture. What should James do?

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% Correct96%