A university Endowment Fund is evaluated using Top-Down and Bottom-Up analysis, and against a 40:60 (Bonds:Equity) benchmark. The evaluation used the Fund and Benchmark performance over a 1-year period and the results are provided below in annualised terms.

Excess Returns and Volatility:

	Average Excess returns above risk free	Volatility
Fund	14.3%	25.6%
Benchmark	12.9%	16.9%

Regression of weekly excess fund returns (Fund return risk free return) regressed against excess benchmark returns (benchmark return risk free return) are presented below:

	Alpha	Standard error (Alpha)	Beta	Standard Error (Beta)	Standard Deviation (Errors)
Fund	-1.27%	0.95%	1.7	4.65%	19%

Bottom-Up Attribution Analysis Results

Selection Effect = -1.1%

Allocation Effect = 2.5%.

a) ( 2 marks) Explain why the Top-Down alpha does not equal the over/under performance of the Endowment fund through Bottom-up analysis.

b) (2 marks) Explain if the Endowment Fund's portfolio manager has skills to outperform the benchmark consistently in the future? (You can use 1.96 as the 95% two-tail T-statistic for your answer. T-statistics for Alpha = Alpha/Standard Error of Alpha)

c) (2 marks) Given all the information above, what do you think is the defense:growth (Bonds:Equity) bias of the Endowment fund. Provide justification to support your answer.