QUESTIONS 31 TO 36 RELATE TO FIXED INCOME PORTFOLIO MANAGEMENT FRANCON...

31. The style of investing described in Whitney’s presentation is most likely:

A. a full replication approach.

B. enhanced indexing by small risk factor mismatches.

C. active management by larger risk factor mismatches.

Answer = C

“Fixed-Income Portfolio Management – Part I,” H. Gifford Fong and Larry D. Guin

2013 Modular Level III, Vol. 4, Reading 23, Section 3.1

Study Session 9–23–b

Compare pure bond indexing, enhanced indexing, and active investing with respect to the

objectives, advantages, disadvantages, and management of each.

C is correct because Granite is not only tilting the portfolios with regard to certain sectors,

quality, or term structure as an enhanced indexer would, it is also making duration adjustments.

An indexer (full replication approach) or enhanced indexer would keep the duration matched to

the index.