Consider the following information regarding the performance of a money manager in a recent month. The table
Question:
Consider the following information regarding the performance of a money manager in a
recent month. The table represents the actual return of each sector of the manager’s portfolio in
column 1, the fraction of the portfolio allocated to each sector in column 2, the benchmark or neutral
sector allocations in column 3, and the returns of sector indices in column 4.
Actual Return Actual Weight Benchmark Weight Index Return
Equity 2% 0.70 0.60 2.5% (S&P 500)
Bonds 1 0.20 0.30 1.2 (Barclay’s Aggregate)
Cash 0.5 0.10 0.10 0.5
a. What was the manager’s return in the month? (Do not round intermediate calculations. Input all
amounts as positive values. Round your answer to 2 decimal places.)
b. What was the benchmark portfolio’s return in the month? Hint: the benchmark portfolio uses
benchmark weight and indexing approach.
c. What was the contribution of security selection to relative performance? (Do not round
intermediate calculations. Round your answer to 2 decimal places. Negative amount should be
indicated by a minus sign.)
d. What was the contribution of asset allocation to relative performance? (Do not round
intermediate calculations. Round your answer to 2 decimal places.)