You are evaluating the performance of two fund managers to help a client understand their strengths and weaknesses in security selection and asset allocation. The data relevant to the performance of these two fund managers and those of a benchmark portfolio are given in the following table: Manager/Benchmark Total return Manager A Manager B Return attributable to security selection 6% 4% Benchmark portfolio 5% -0.2% Assume that the data for managers A and B reflect average performance over Return attributable to asset allocation -2% 5% 8% -1% 5.2%
You are evaluating the performance of two fund managers to help a client understand their strengths and weaknesses in security selection and asset allocation. The data relevant to the performance of these two fund managers and those of a benchmark portfolio are given in the following table: Manager/Benchmark Total return Manager A Manager B Return attributable to security selection 6% 4% Benchmark portfolio 5% -0.2% Assume that the data for managers A and B reflect average performance over Return attributable to asset allocation -2% 5% 8% -1% 5.2%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:II.
III.
You are evaluating the performance of two fund managers to help a client
understand their strengths and weaknesses in security selection and asset
allocation. The data relevant to the performance of these two fund managers
and those of a benchmark portfolio are given in the following table:
Manager/Benchmark
Total
return
Manager A
Manager B
Benchmark portfolio
Return
attributable to
security selection
Return
attributable to
asset allocation
8%
-1%
5.2%
6%
-2%
4%
5%
5%
-0.2%
Assume that the data for managers A and B reflect average performance over
the most recent five years and both managers actively manage their
portfolios.
Briefly describe one strength and one weakness for each manager.
A globally diversified portfolio faces a lower market risk than a domestically
diversified portfolio.
Examine the above statement with reference to possible benefits of
international diversification. Use an appropriate graph to illustrate.
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