Consider the two fund managers portfolios averaged over the last 5 years, and us

Question

Consider the two fund managers portfolios averaged over the last 5 years, and use the same benchmark. Report (calculate) the comparative strengths of each fund manager. Weights Mid Caps 60% 30% Returns Mid Caps 9% 9% 9% Small Caps Manager 1 | 10% Manager 2 | 1 1% Benchmark 12% Large Caps 10% 8% 7% Small Caps 30% 30% 20% Large Caps 10% 40% 40% -40% 1. Workout benchmark, FM1 and FM 2 returns. Use these to calculate FM1 and 2 over/under performance against benchmark. Calculate the allocation and selection effect for both FMs. Check figures are correct by adding them and confirming the equal the over/under performance. 2. 3. Comment on the results.

Explanation / Answer

A B C=A*B D E F=D*E G H I=G*H Manager 1 Manager 2 Benchmark Weight Return( percentage) Weighted Return Weight Return(Percentage) Weighted Return Weight Return(Percentage) Weighted Return Small Cap 0.3 10 3 0.3 11 3.3 0.2 12 2.4 Mid cap 0.6 9 5.4 0.3 9 2.7 0.4 9 3.6 large Cap 0.1 10 1 0.4 8 3.2 0.4 7 2.8 TOTAL 1 9.4 1 9.2 1 8.8 FM1 Return 9.40% FM2 Return 9.20% Bench mark return 8.80% Both FM1 and FM2 returns are higher than Benchmark return FM1 has the highest returns Both FM1 and RM2 have higher allocation than Benchmark in small caps FM1 has much higher allocation in Mid caps

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