6.) Priorat is most likely correct with regard to which structural trade?
A. Putables
B. Bullets
C. Callables
Sonera
William Gatchell, CFA, is an investment analyst with the Sonera Endowment Fund. Sonera is
considering hiring a new equity investment manager. In preparation, Gatchell meets with Anjou
Lafite, another analyst at the fund, to review a relevant part of the endowment’s investment
policy statement:
Funds will be invested in the most efficient vehicle that meets the investment objective.
Each manager must demonstrate the efficiency with which the tracking error they use
delivers active return. In addition, each manager must consistently adhere to his or her
stated style.
Gatchell is given the task of reviewing three investment managers and selecting a manager that
is most likely to adhere to Sonera’s investment policy statement. Information about the
investment managers is shown in Exhibit 1.
Exhibit 1: Investment Manager Data
Investment Manager
A B C
Assets under management ($
millions) 1,325 3,912 524
Information ratio –0.27 0.5 0.75
Small-cap value index, beta 0.95 0.98 1.05
Small-cap growth index, beta 0.32 0.43 0.48
Large-cap value index, beta 1.05 1.1 0.96
Large-cap growth index, beta 0.47 0.39 0.37
Manager-stated style Value Value Growth
Manager-stated sub-style Low P/E High yield Momentum
Gatchell is reviewing the fee structures proposed by the three investment managers. He finds
the following reference in Sonera’s investment policy statement:
The fee structure must be easy to understand and avoid undue complexity wherever
possible. Also, the fee structure must be predictable, so Sonera can reasonably forecast
these costs on a yearly basis as an input to the annual budgeting process.
He understands there are many different fee structures, and he wants to make sure he chooses
the most appropriate one for the Sonera. Gatchell prepares a recommendation for the
investment policy committee regarding the most appropriate fee structure.
Sonera has followed an active investment style for many years. Gatchell would like to
recommend to the investment policy committee that a portion of the funds be invested using a
passive investment style. His research shows there are a number of methods used to weight the
stocks in an index, each having its own characteristics. The one key feature he believes is
important is that the method chosen not be biased toward small-capitalization stocks.
Gatchell is also examining different ways to establish passive equity exposure. He states to
Lafite:
There are a number of ways to get passive equity exposure; we can invest in an equity
index mutual fund, a stock index futures contract, or a total return equity swap. Stock
index futures and equity swaps are low-cost alternatives to equity index mutual funds;
however, a drawback of stock index futures is that they have to be rolled over
periodically. One advantage of investing in equity mutual funds is that shares can be
redeemed at any point during the trading day.
Gatchell is reviewing the performance of another investment manager, Far North, which uses a
value-oriented approach and specializes in the Canadian market. Gatchell would like to
recommend to the investment policy committee that the fund diversify geographically. The
information for Far North and the related returns are shown in Exhibit 2.
Exhibit 2: Far North—Return Information
Rate of Return
Far North 14%
True active return –1%
Misfit active return 5%
The investment policy committee reviews the information in Exhibit 2 and is not familiar with
the terms “true active return” and “misfit active return.” Gatchell responds with the following
statement:
The true active return is the return Far North made above its normal benchmark return. The
misfit active return is the return Far North made above the investor’s benchmark return. The
term “investor’s benchmark” refers to the benchmark the investor uses to evaluate
performance for a given portfolio or asset class.
Bạn đang xem 6. - CFA MOCK EXAM LEVEL III MOCK EXAM VERSIONB QUESTIONS 2014