Question

Consider the following information regarding the performance of a money manager in a recent month. The table represents the actual return of each sector of the manager's portfolio in column 1, the fraction of the portfolio allocated to each sector in column 2. the benchmark or neutral sector allocations in column 3, and the returns of sector indices in column 4. Actual Weight Actual Return 2.5 1.5 Equity Bonds Cash 2.6 Benchmark Weight e.5 e. 1 Index Return 3% (S&P 500) 1.7 (Barclay's Aggregate) 8.5 2.1 a-1. What was the manager's return in the month? (Do not round intermediate calculations. Input all amounts as positive values. Round your answer to 2 decimal places.) The manager's return in the month is % a-2. What was her overperformance or underperformance? (Do not round Intermediate calculations. Input all amounts as positive values. Round your answer to 2 decimal places.)

Answer 1

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Answer:

PQ-1) B D - BAC Return Actual return 2.5 % Actual weight 1.5 % Equity 1.57 0.157. 0.5 % 0.3 0.15% cash 1,80 % Thus, manager's return was 1.80% В Index return Benchmark! Weight D- BAC & Bogey return Equity 3% 3 % 0.6 1.80% Bonds 1.7% 0.1 0.17% 0.3 O. IS % 0. Cash 5% 2.1314

Since Bogey return is more than managed's return, it was her under performance So, Underperformance = Bogey return - manager's return. = 2.12% - 1.80 % 0.32%

B IC TD=B-C E F = DXE Actual Index Different actual contribution retuon return -tial weight to return ormance -0.3 % Equity 2.5% Bonds 1.5% 3% 1.7% -0.5% - 0.2% 0.6 0.1 -0.02% Cash 0.5% 0.5% 0% 0.3 10% -0.32 % Thus, Contribution of secusity Selection to relative performance des -0.32% (0) Since there is no difference between Actual weight and Benchmark weight, the contribution of asset allocation to relative performance was 0%. So answer is 0.00%