Question
1. A portfolio manager is considering two options for a benchmark index.The first is an absolute return based on a minimum return target of 9.5%
1. A portfolio manager is considering two options for a benchmark index. The first is an absolute return based on a minimum return target of 9.5% and the second is the median of the universe of US large-cap core equity managers. Which of the following properties of a return point Valid reference do these two options have?
Specified in advance
invertible
Measurable
unambiguous
2. You're trying to understand why your portfolio of top large-cap stocks underperformed its benchmark and perform a sector attribution analysis based on the past year:
Sector | Sectoral Returns | Portfolio weights | Reference weights |
Information technology | 10,75% | 18,71% | 19,06% |
Consumer staples | 12,31% | 16,52% | 16,10% |
Energy | 8,63% | 9,38% | 9,53% |
Utilities | -3,92% | 15,65% | 14,87% |
From this analysis, which sector is the main contributor to the underperformance of the core portfolio relative to its benchmark?
Energy
Utilities
Information technology
Consumer staples
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