HKSI Paper 12 The investment management process question: investment time horizon

HKSI Paper 12The investment management process

Mrs Leung, 58, plans to retire at 60 and then draw an income from her portfolio for about 25 years. Which description of her investment time horizon is MOST accurate?

A No horizon can be set until she decides whether to buy an annuity on retirement
B A single-stage horizon of about 25 years that begins only when she retires
C A short horizon of about two years, ending on the day she retires and stops work
D A multi-stage horizon: about two years to retirement, then a long drawdown stage

Show the answer and explanation

Answer: D. A multi-stage horizon: about two years to retirement, then a long drawdown stage

The time horizon is the period over which the portfolio must meet the client's objectives, and it can have more than one stage when the client's circumstances change at a known point. Mrs Leung has an accumulation stage of about two years and then a drawdown stage of about 25 years, so her horizon is multi-stage and long overall. Treating it as two years ignores the decades of withdrawals that follow. Treating it as a single 25-year stage ignores the change at retirement. An undecided annuity choice does not prevent a horizon being set; it is reviewed later. Source: Standard investment management process (planning, execution and feedback); investment policy statement practice (as at October 2026).

Common mistake

Ending the horizon at retirement. The portfolio keeps working through the drawdown years, so the horizon is long and multi-stage.

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Original study material mapped to the public HKSI Paper 12 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.