Jason conducts a bottom-up analysis on the three high yield funds. Jason finds the selection and allocation effects for each segment based on a Bloomberg US High Yield Index. [Note: Ltd. means Limited, Mod. means Moderate, Ext. means Extended, Dur. means Effective Duration, Select means Selection Effect, Alloc means Allocation Effect]

	Ltd Dur - Select	Ltd. Dur. - Alloc	Mod. Dur. Select	Mod. Dur. Alloc	Ext. Dur. - Select	Ext. Dur. - Alloc
Fund 1	0.25%	-0.01%	0.14%	-0.02%	0.51%	0.01%
Fund 2	0.11%	-0.13%	-0.41%	0.24%	0.04%	-0.09%
Fund 3	-0.31%	0.07%	-0.28%	0.09%	-0.06%	0.013%

(i) Rank the funds in terms of their performance against the benchmark

(ii) Explain how would a fund manager select one high yield bonds with high duration to generate higher returns than other high yield bonds with similar duration available in the market?

(iii) If Jason has to recommend the fund whose fund manager is best able to take advantage of forecasted changes in the yield curve, which fund should he select? Explain your selection process and its link ton the forecasted changes in the yield curve