The answer says that the calculation will be using the Russel 1000 rather than the normal benchmark that more closely resembles the manager’s style, which is why the active risk is 6.1% and not 6.0%.
Did they mean that it will be using the Russel 3000? The question says that “the overall equity porfolio’s benchmark is the Russel 3000” … and it specifically lists the normal benchmark as “cash with russel 1000 overlay”
I’m not seeing a consensus on what the benchmark that is incorrectly used in the equation should be? Does anybody disagree with me that they meant to refer to the 3000 since the 1000 is the normal portfolio? That and the question explicitly states that the 3000 is the “overall benchmark” e.g. “investors benchmark” rather than “managers benchmark” (not sure if i got the terminologies right but you get the idea).
It should be “Russell 3000”, IMHO. The confusion comes from two places: Russell 1000(a typo, I think) and the active risk of the portfolio(it’s the “total” active risk). It does not explicitly use terms like “true” active risk.