Your client is willing to invest in Mutual funds industry to keep its portfolio diversified. Therefore he wants your advice in respect to which fund is better option for his risk level positions. He is risk averse investors and required high liquidity which enables him to meet day to day operations. You have gathered the data from Mutual funds and its allocation which are mentioned below:-

FUND A

Cash & Cash Equivalents 30.00%

Equity 40.00%

Bonds 30.00%

Total 100.00%

Portfolio Return 18.00%

Benchmark Index Return 15.00%

Risk Free Rate of Return 7.50%

Portfolio Risk (Variance) 1.50%

Tracking error 5%

Covariance with Market 0.1425

Variance of Market 0.5752

FUND B

Cash & Cash Equivalents 5.00%

Equity 70.00%

Bonds 25.00%

Total 100.00%

Portfolio Return 25.00%

Benchmark Index Return 20.00%

Risk Free Rate of Return 7.50%

Portfolio Risk (Variance) 6.00%

Tracking error 12%

Covariance with Market 0.2567

Variance of Market 0.1426

FUND C

Cash & Cash Equivalents 20.00%

Equity 60.00%

Bonds 20.00%

Total 100.00%

Portfolio Return 20.00%

Benchmark Index Return 22.00%

Risk Free Rate of Return 7.50%

Portfolio Risk (Variance) 4.50%

Tracking error 10%

Covariance with Market 0.1555

Variance of Market 0.1825

REQUIRED:

Use above information to measure the different ratios for mutual funds evaluation.

Sharpe Ratio

. Jensen's Alpha

Information Ratio

Recommend which fund is best suitable to clients risk and return profile.