| Q1. | Appraise and explain the different elements that comprise a high-quality investment policy. Illustrate your answer by providing concrete examples. [50 marks] |
| Q2. | Data on investment returns, investment weights, and investment performance for a 12 stock investment fund and benchmark are contained in the tables below. |
| Investment return data | Investment weights | |||||
| Benchmark returns | Fund returns | Constituent | Benchmark | Fund | ||
| 28/02/2019 | 1.53% | 1.30% | company 1 | 8.0% | 9.5% | |
| 31/03/2019 | 0.35% | 0.40% | company 2 | 9.0% | 9.0% | |
| 30/04/2019 | 0.63% | 0.50% | company 3 | 9.0% | 9.5% | |
| 31/05/2019 | 1.25% | 1.00% | company 4 | 8.0% | 9.5% | |
| 30/06/2019 | 0.98% | 1.10% | company 5 | 8.0% | 9.5% | |
| 31/07/2019 | -0.25% | -0.10% | company 6 | 8.5% | 0.0% | |
| 31/08/2019 | -1.37% | -1.10% | company 7 | 6.0% | 9.5% | |
| 30/09/2019 | -1.64% | -1.30% | company 8 | 9.5% | 9.0% | |
| 31/10/2019 | -0.80% | -0.60% | company 9 | 9.0% | 9.5% | |
| 30/11/2019 | 0.90% | 1.20% | company 10 | 9.0% | 6.0% | |
| 31/12/2019 | 2.40% | 2.10% | company 11 | 7.5% | 9.5% | |
| 31/01/2020 | 1.90% | 1.50% | company 12 | 8.5% | 9.5% | |
| 29/02/2020 | -1.80% | -1.40% | Cash | 0.0% | 0.0% | |
| Total | 100.0% | 100.0% |
| Benchmark and Fund Statistics | ||
| Benchmark | Fund | |
| Compound 13 month return | 4.04% | 4.62% |
| Monthly standard deviation | 1.38% | 1.16% |
| Beta | 1.0 | 0.83 |
| Risk free rate | 1.00% |
| Number of Standard deviations | Proportion of values of a normal distribution that will fall within the standard deviations |
| 1.0 | 0.68 |
| 1.282 | 0.80 |
| 1.645 | 0.90 |
| 1.960 | 0.95 |
| 2.326 | 0.98 |
| 2.576 | 0.99 |
| 2.807 | 0.995 |
Based on the information contained in the tables above, calculate the following performance measures to 2 decimal places for both the fund and the benchmark unless otherwise stated. Show all workings.
- Annualisedtracking error and annualised Information Ratio of the fund only.
[12 marks]
- Active Share of the fund only.
[8 marks]
- Annualised return.
[2 marks]
- Annualised risk.
[2 marks]
- Annualised Sharpe ratio.
[4 marks]
- Annualised Treynor ratio.
[4 marks]
- Downside deviation.
[8 marks]
- Sortino ratio.
[2 marks]
- Value at Risk (99%).
[8 marks]
[50 marks total]
