Final answer:
In investment management, configuring asset classes directly relates to setting up the Asset Allocation which determines the mix of asset types in a portfolio. Expected returns, risk tolerance, and portfolio liquidity are critical aspects influencing asset allocation but are not set during its configuration.
Step-by-step explanation:
When configuring asset classes in investment management, the factor that is defined is C) Asset Allocation. Asset allocation refers to the process of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The allocation is determined based on an individual's goals, risk tolerance, and investment horizon. It is crucial for managing investment risks and can help to enhance expected returns. While expected returns, risk tolerance, and portfolio liquidity are all significant considerations in managing investments, they are outcomes or inputs to the asset allocation process rather than what is directly set when configuring asset classes.
Expected rate of return is a factor that encompasses forecasts on the earnings an investment will generate, typically displayed as a percentage rate. The risk associated with an investment indicates the uncertainty or variability in the returns, which can be higher or lower than expected. Finally, liquidity is about how quickly and easily an asset can be converted into cash without impacting its market price.