Select the fund, based on the Exhibit 1 data, that is most appropriate for Connell’s needs. Justify your selection with two reasons.

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.

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

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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EXHIBIT 2 Fund Performance Compared to Benchmark* Fund Underperforms In Line Outperforms Zeta X Eta Theta X X