You have been asked to evaluate the investment performance of three professionally managed equity funds relative to each other and to the market index. The average return for Treasury bill is 5%. After gathering quarterly return data over the past five years, you compute the following statistics.

ACER Fund:

Average return = 10.2%, standard deviation of return = 16%, beta = 0.82, R-squared = 87%

BRIC Fund:

Average return = 18.3%, standard deviation of return = 8%, beta = 1.36, R-squared = 63%

CRUX Fund:

Average return = 13.2%, standard deviation of return = 9.2%, beta = 0.99, R-squared = 98%

FBM KLCI:

Average return = 13.8%, standard deviation of return = 9%, R-squared = 100%

Based on the above data, can you conclude that manager of ACER equity fund underperformed the market while the manager of BRIC equity fund outperformed the market? Why or why not?

What was the most likely investment objective followed by the manager of CRUX fund and by the manager of BRIC fund?

Calculate Treynor and Sharpe measures for the market portfolio.

Calculate Treynor measure for ACER and state whether the fund underperformed, equaled, or outperformed the KLCI.

Calculate Treynor measure for BRIC and state whether the fund underperformed, equaled, or out-performed the KLCI.

Calculate Treynor measure for CRUX and explain whether the fund underperformed, equaled, or out-performed the KLCI.

Calculate Sharpe measure for ACER and explain whether the fund underperformed, equaled, or out-performed the KLCI.

Calculate Sharpe measure for BRIC and explain whether the fund underperformed, equaled, or out-performed the KLCI.

Calculate Sharpe measure for CRUX and explain whether the fund underperformed, equaled, or out-performed the KLCI.

Explain why Treynor and Sharpe measures led to conflicting conclusions.