You are evaluating two funds: Berkshire Getaway (BGT) and Quantum Strategy Fund (QSF). The two funds are well diversified, and invest in different asset classes, e.g. equity, bonds, alternative investments etc.

The information about the two funds is provided below. The index model regression estimates are based on excess returns. The market index is ASX200.

What are the funds' excess returns?

B. What are the funds' Sharpe Ratios?

C. What are the funds' Treynor Ratios?

D. Which funds are more tilted towards equity? Explain.

 

Standard deviation of excess returns Residual standard deviation Average return Index model regression estimates R BGT 27.50% 14.60% 0.025 +0.9(Rm - rf) 67% QSF Ltd 23.60% 11.80% -0.01 + 1.4(Rm - rf) 80% Market T-bills 12% 5%