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Performance Measurement A clients portfolio is managed by two different managers. The beginning portfolio values are shown below. Assume that no distributions were made from
| Performance Measurement | |||||
| A clients portfolio is managed by two different managers. The beginning portfolio values are | |||||
| shown below. Assume that no distributions were made from either portfolio and that the client made no | |||||
| further contributions to either portfolio. Both managers are invested in the same fixed income sector. | |||||
| Month | Manager 1 | Manager 2 | |||
| January 2017 | $10,000,000 | $10,000,000 | |||
| February | $10,250,000 | $10,750,000 | |||
| March | $10,400,000 | $10,300,000 | |||
| April | $10,500,000 | $11,000,000 | |||
| May | $10,650,000 | $10,250,000 | |||
| June | $10,750,000 | $11,150,000 | |||
| July | $10,800,000 | $10,500,000 | |||
| August | $10,900,000 | $11,500,000 | |||
| September | $10,950,000 | $10,850,000 | |||
| October | $10,900,000 | $10,200,000 | |||
| November | $10,950,000 | $10,850,000 | |||
| December | $11,000,000 | $10,950,000 | |||
| January 2018 | $11,200,000 | $11,400,000 | |||
| (a) Calculate the monthly returns for each manager. | |||||
| (b) Calculate the monthly and annualized arithmetic average return for each manager. | |||||
| (c) Calculate the monthly and annualized geometric average return for each manager. | |||||
| (d) Calculate the standard deviation of the monthly returns for each manager. | |||||
| (e) Which manager demonstrated a better performance relative to risk? | |||||
| Support your conclusion. | |||||
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