a. Design a benchmark to measure the performance of each of the products above.

b. Define and justify each component of the benchmarks.

Your firm is managing 4 investment products with the following characteristics:

Equity Standard

200 stocks

P/E= 1.05x that of the broad market

D/E= 0.95x that of the broad market

All Economic Sectors

Total assets under management= $ 2.5 billion

Value Dynamics

110 stocks

P/E= 2.0x that of the broad market

D/E= 85 percentile of the broad market

Overweight in technology, health care and housing sector

Total assets under management = $ 1.5 billion

Blue Growth

125 stocks

P/E= 0.75x that of the broad market

D/E= 35 percentile of the broad market

Overweight in consumer staples, utilities, and closed end funds

Total assets under management = $ 4.5 billion

Fixed Income Plus

250 bonds

50% invested in government bonds, half in maturities below 10 years and the rest with maturities above 10 year

25% invested in US Corporate Bonds. 75% of the US Corporates invested in Investment grade bonds and the rest in high yield bonds.

25% in international bonds, half of it in developed markets and the other half in emerging markets

Total assets under management = $ 5.0 billion

Global Growth

This product is a combination of the above four products.

Total assets under management = $ 7.5 billion