Question
A university Endowment Fund is evaluated using Top-Down and Bottom-Up analysis, and against a 40:60 (Bonds:Equity) benchmark. The evaluation used the Fund and Benchmark performance
A university Endowment Fund is evaluated using Top-Down and Bottom-Up analysis, and against a 40:60 (Bonds:Equity) benchmark. The evaluation used the Fund and Benchmark performance over a 10 year period and the results are provided below in annualised terms.
Excess Returns and Volatility:
Average Excess returns above risk free | Volatility | |
Fund | 14.3% | 25.6% |
Benchmark | 12.9% | 16.9% |
Regression Results:
Alpha | Standard error (Alpha) | Beta | Standard Error (Beta) | Standard Deviation (Errors) | |
Fund | -1.27% | 0.95% | 1.7 | 4.65% | 19% |
Which one of the following statements is incorrect based on the performance of the portfolio against its benchmark?
Group of answer choices
The Alpha from the regression is negative because the tracking error is high.
The portfolio manager had bad luck with their investments
The tracking error of the fund is 19%
The Information Ratio of the fund is -0.07
The portfolio generated positive excess returns
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