(a) Fumiko Ando, a portfolio manager for a newly created U.S. large-cap value equity fund in San Francisco, will start managing the fund in January 2023. She has to pick a benchmark for herself for the sake of computing her compensation every year. She is considering two possible benchmarks: (1) the top quartile of all fund managers in the U.S. whose fund returns is in the top 25% in the immediate past year; or (2) S&P 500 Large Cap Value index. Discuss which benchmark is a better benchmark for Ms. Andos fund for the evaluation of the fund performance for 2022 (which will take place at the beginning of 2023) according to the properties identified by Richards (2001).

(b) Why does an institutional investor, e.g., a pension plan, have to conduct returns-based style analysis regularly on portfolios managed by the fund managers the pension plan hired? Explain.