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.
Index Re
Actual Return
2.28
Actual Weight
0.4
Benchmark Weight
0.5
Equity
Bonds
Cash
2.78 (S&P 500)
1.5 (Barclay's Age
1.1
0.2
0.2
0.7
0.4
0.3
0.8
Required:
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.)
ces
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

a-1. The manager's return in the month, based on the performance table information, is 1.38%.

a-2.  The manager's underperformance is 0.51% (1.89 - 1.38).

What is a manager's underperformance?

A manager's underperformance occurs when the manager delivers results below expectation.

For instance, the weighted benchmark return was expected to be 1.89%, but the manager achieved an actual weighted return of 1.38%.

Data and Calculations:

                     (1) Actual    (2) Actual   (3) Benchmark   (4) Index

                         Return        Weight           Weight     Return

Equity                  2.2%         0.4                  0.5                 2.7% (S&P 500)

Bonds                  1.1             0.2                  0.2                  1.5 (Barclays Aggregate Bond index)

Cash                    0.7          0.4                   0.3                  0.8

                     (1) Actual    (2) Actual   Weighted

                         Return     Weight       Returns

Equity                  2.2%         0.4            0.88%

Bonds                  1.1             0.2            0.22

Cash                    0.7          0.4              0.28

Weighted Returns =                             1.38%

                      Benchmark   (4) Index                   Weighted

                            Weight        Return                   Benchmark

Equity                  0.5                 2.7% (S&P 500)    1.35% (0.5 x 2.7)

Bonds                  0.2                  1.5 (Barclays       0.30 (0.2 x 1.5)

Aggregate Bond index)

Cash                    0.3                  0.8                      0.24 (0.3 x 0.8)

Weighted Benchmark Return =                            1.89%

Thus, there was a comparative underperformance of 0.51%.

Learn more about management performance indices at https://brainly.com/question/26717041

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