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Problem 11-08

Shown below are the investment weights for the securities held in four different portfolios: three mutual funds and the benchmark index that each of those funds uses.

		% Security Investment Weight:
Security		Benchmark Index		Fund X		Fund Y		Fund Z
1		11	%	15	%	36	%	10	%
2		11		11		0		12
3		11		9		10		12
4		11		7		0		12
5		11		12		15		12
6		11		7		0		12
7		11		6		29		12
8		11		11		30		10
9		11		14		0		12
10		11		7		20		12

1. Calculate the active share (AS) measure for Fund X, Fund Y, and Fund Z relative to the benchmark index. Do not round intermediate calculations. Round your answers to one decimal place.

   Fund X: %

   Fund Y: %

   Fund Z: %

2. Using active share calculations above, indicate which fund is the most likely to be considered: (i) a passive index fund, (ii) a closet (or enhanced) index fund, and (iii) an actively managed concentrated stock-picking fund. Explain the reason for your classification.

   Fund X is considered -Select-1.an actively managed concentrated stock-picking fund /2.a closet (or enhanced) index 3. a passive indexbecause it -Select-differs /does not differ Item 5 in the investment weights of holdings relative to the benchmark index.

   Fund Y is considered -Select-an actively managed concentrated stock-picking funda closet (or enhanced) index funda passive index fundItem 6 because, it is -Select-lessmoreItem 7 concentrated than the benchmark and has -Select-fewermoreItem 8 holdings and -Select-biggersmallerItem 9 investment positions.

   Fund Z is considered -Select-an actively managed concentrated stock-picking funda closet (or enhanced) index funda passive index fundItem 10 because its security holdings come closer to matching the benchmark, -Select-in number of those holdingsin the investment weights of those holdingsboth in number of holdings and the investment weights of those holdingsItem 11 .