Groundlearn / Glossary / Implementation shortfall
Implementation shortfall
A CFA term, defined in plain English with the distinction examiners test.
What it means
The difference between the return on a paper portfolio and the return actually achieved, capturing delay, market impact, commissions and unfilled orders.
The exam angle
The honest measure of execution cost, because it counts the trades that never happened at the price that was wanted.
Where it appears in the syllabus
- Portfolio Management pathwayCFA Level III · exam weight 30–35% · Active equity, yield-curve and credit strategy, LDI, trade execution.
- Performance MeasurementCFA Level III · exam weight 5–10% · Attribution, appraisal, manager selection and the GIPS standards.
Related terms
- Active shareThe proportion of a portfolio’s holdings that differs from its benchmark, from 0% for an index fund to 100% for no…
- Derivatives overlayAdjusting a portfolio’s exposures with derivatives while leaving the underlying holdings untouched.
- Fundamental law of active managementExpected active return is a function of skill, the number of independent decisions taken, and how fully those…
- Market impactThe adverse price move caused by the act of trading itself.
- Risk budgetingAllocating a portfolio’s total risk across strategies or managers, rather than allocating its capital.
- Yield curve strategyPositioning a bond portfolio for an expected change in the shape of the curve — bullet, barbell or ladder structures…
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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