You have been asked to evaluate returns from your commercial real estate investment fund (Bluestone Fund) against an industry benchmark index to determine how successful your active investment strategy has been. Specifically, a potential client wants you to compare the performance of your portfolio strategy against a passive strategy of simply investing based on the same proportions of properties and locations comprising the index.

During the most current quarter, the following information has been provided to you based on the property type and location:

A.

Bluestone Fund					Industry Index
Property Type	% of Fund Value	Return	Weighted Return		% of Index Value	Return	Weighted Return
Apartments	14.4%	13.0%	1.8%		20.4%	8.9%	1.8%
Hotel	0.0%	0.0%	0.0%		2.1%	8.5%	0.2%
Industrial	13.5%	8.5%	1.2%		16.0%	7.0%	1.1%
Office	44.1%	12.7%	5.6%		37.2%	7.6%	2.8%
Retail	28.3%	8.6%	2.4%		24.3%	9.7%	2.4%
Total	100.0%		11.0%		100.0%		8.3%

B.

Bluestone Fund					Industry Index
Location Type	% of Fund Value	Return	Weighted Return		% of Index Value	Return	Weighted Return
North	6.3%	4.5%	0.3%		11.0%	6.1%	0.6%
South	27.6%	8.6%	2.4%		18.0%	7.8%	1.4%
East	43.3%	14.0%	6.1%		34.0%	9.0%	3.1%
West	22.7%	9.9%	2.2%		37.0%	8.8%	3.2%
Total	100.0%		11.0%		100.0%		8.3%

Calculate the extent to which the Bluestone Fund is over- or (under)weighted by property type relative to the industry index.

Calculate the extent to which the Bluestone Fund is over- or (under)weighted by location/region relative to the industry index.

To what extent was the superior performance by Bluestone attributable to property selection and allocation in (A)?

To what extent was the superior performance by Bluestone attributable to property selection and allocation in (B)?

Assuming that the standard deviation of returns for its Bluestone Fund was 10.0 and 9.0 for index returns, what may be said about the relative risk for the two funds.