Part 1

Table below provides the information regarding the performance of a fund manager in recent month. The return and weight of each asset class in both managed portfolio and benchmark/bogey portfolios are presented respectively. Please show full workings in the space below.

	Portfolio Weight	Portfolio Return	Benchmark Weight	Benchmark Return
Stocks	0.65	6.50%	0.53	8.60%
Bonds	0.25	3.00%	0.32	2.60%
Cash	0.10	0.60%	0.15	0.60%

(a) Calculate the returns of the managed portfolio and the return of the benchmark/bogey portfolio. Based on the excess return of the managed portfolio, did the fund manager perform well relative to the benchmark portfolio? (3marks)

(b) Which of the asset allocation or sector and security selection strategies has negatively affected the performance of the fund manager? Please show full workings for contribution of asset allocation to performance and contribution of security selection to performance. (8 marks)

Part 2

Serena is managing an investment portfolio. She invested in four stocks in her portfolio on 15^th of December 2020. Table below presents the price changes of these four stocks from 15^th of December 2020 to 20^th of January 2021.

Stocks	15th of December 2020	20th of January 2021
ABC	$16.28	$18.30
XYZ	$19.20	$16.75
TSV	$35.10	$31.31
DRT	$100.64	$101.00

On 20^th of January 2021, Serena sold stocks ABC and DRT and continued holding stocks XYZ and TSV. What is the best terminology to describe Serenas behaviour? Please use terminology covered in the lectures and explain your answer. (4 marks)