Identify the conditions under which the adviser would find style analysis most useful. Connell elects to defer

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Identify the conditions under which the adviser would find style analysis most useful.

Connell elects to defer fund selection and places his inheritance in a short-term money market account. A year later, Connell reviews the one-year performance results of the three funds compared to the benchmark, as shown in Exhibit 2.

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Connell believes he now has two main alternatives for fund investment:
• Alternative 1: Keep his inheritance in the money market account to avoid the Eta fund.
• Alternative 2: Place his inheritance in the Theta fund.

John Connell inherited $700,000 at the beginning of the year and has been developing related investment goals and policies with a financial adviser. The adviser has identified three

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potential investment funds for consideration. All three have earned similar returns over the last five years and are expected to earn similar returns going forward. Publishing their investment results on a timely and routine basis, they include the following asset classes:
• US equities • Global equities • Venture capital • Corporate bonds • Government bonds • Cash reserves Exhibit 1 presents information about the funds.

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