Question: The sector allocation of two funds and their benchmark was obtained on the 1st of July and are as follows: Sectors Financials Consumer cyclicals

The sector allocation of two funds and their benchmark was obtained on

The sector allocation of two funds and their benchmark was obtained on the 1st of July and are as follows: Sectors Financials Consumer cyclicals Consumer non-cyclicals Total Benchmark 49% 35% 16% 100% Fund 1 49% 30% 21% 100% Fund 2 45% 15% 40% 100% Based on the above asset allocation and assuming that these asset allocations are established for the next 3 months, please answer the following questions: a) Explain: (i) if the funds in the table above (Fund 1 and Fund 2) are managed actively or passively. (ii) Now explain which fund will have higher Tracking Error. b) Explain which fund is optimistic regarding the economy (expects the economy to improve).

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