David Theo is analyzing Amazing Fund using Top-Down and Bottom-Up analysis, and against Russell 1000 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 Results:

	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 = -0.9%

Allocation Effect = 2.5%.

You are required to:

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

b) (2 marks) Explain if the Amazing Fund's fund manager has skills to perform well consistently in the future? (You can use 1.96 as the 95% two-tail T-statistic for your answer)

c) (1 mark) Calculate the Information Ratio of the fund.

d) (1 mark) Explain if the fund is expected to have a large cap or a small cap bias?