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Primo Management Company is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios
Primo Management Company is looking at how best to evaluate the performance of its managers. Primo has been hearing more and more about benchmark portfolios and is interested in trying this approach. As such, the company hired Sally Jones, CFA, as a consultant to educate the managers on the best methods for constructing a benchmark portfolio, how to choose the best benchmark, whether the style of the fund under management matters, and what they should do with their global funds in terms of benchmarking. For the sake of discussion, Jones put together some comparative twoyear performance numbers that relate to Primo's current domestic funds under management and a potential benchmark. As part of her analysis, Jones also takes a look at one of Primo's global funds. In this particular portfolio, Primo is invested in Dutch stocks and in British stocks. The benchmark is invested in Dutch and in British stocks. On average, the British stocks outperformed the Dutch stocks. The euro appreciated versus the US dollar over the holding period while the pound depreciated versus the dollar. In terms of the local return, Primo outperformed the benchmark with the Dutch investments but underperformed the index with respect to the British stocks. Required: What is the withinsector selection effect for each individual sector? Round your answers to decimal place. Negative amount should be indicated by a minus sign. Answer is complete but not entirely correct.
Primo Management Company is looking at how best to evaluate the performance of its managers. Primo has been hearing more and
more about benchmark portfolios and is interested in trying this approach. As such, the company hired Sally Jones, CFA, as a
consultant to educate the managers on the best methods for constructing a benchmark portfolio, how to choose the best benchmark,
whether the style of the fund under management matters, and what they should do with their global funds in terms of benchmarking.
For the sake of discussion, Jones put together some comparative twoyear performance numbers that relate to Primo's current
domestic funds under management and a potential benchmark.
As part of her analysis, Jones also takes a look at one of Primo's global funds. In this particular portfolio, Primo is invested in
Dutch stocks and in British stocks. The benchmark is invested in Dutch and in British stocks. On average, the British
stocks outperformed the Dutch stocks. The euro appreciated versus the US dollar over the holding period while the pound
depreciated versus the dollar. In terms of the local return, Primo outperformed the benchmark with the Dutch investments but
underperformed the index with respect to the British stocks.
Required:
What is the withinsector selection effect for each individual sector? Round your answers to decimal place. Negative amount
should be indicated by a minus sign.
Answer is complete but not entirely correct.
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