A balanced fund (investing in both stocks and bonds) outperformed its benchmark by 1.5%. As is usually the case, stocks outperformed bonds by a substantial margin during the period being analyzed. You see that the fund overweighed equities relative to the benchmark and that the average return on the fund's equity portfolio was lower than the equity benchmark return. The excess performance for this fund is most likely due to the asset allocation decision between stocks and bonds superior industry sector weighting allocations within the equity portfolio security selection ability within the equity portfolio Pure luck