Isn’t duration matching consider as active management?
I assume you mean duration mismatching. You can have slight duration mismatches under enhanced indexing with minor mismatching. You’ll notice almost all other factors are the same, which should have steered you away from active.
but the books says in minor mismatch, duration should not be considered. In this case, duration does not match with benchmark which means it is active management, correct?
It was my understanding that any difference in durations means “active management”.
I agree with skillionaire. Does your statement mean you understanding is changed now after taking this exam?
page 9 of CFAI book clearly says that matching duration is necessary in enhanced indexing by small risk factors
Mock 2009 problem - 33 explaination says mismatching duration is active management
I’ve been burned on that answer a couple of times now so as far as I’m concerned a slight mismatch is allowed. I know that’s not what the book says but when you look at the other options, pure matching and active are clearly out, so enhanced is the “best” answer.
check Q-33 then from 2009 Mock
Looking at it right now… to quote, it says that the spread durations “deviate materially” from the index. I don’t think a difference of 0.3 years is “materially” different, but in any case that’s not the point. I just said I agree that the book says that you match duration, but once again, the other options available are _clearly_ incorrect and while there is a slight mismatch in duration it looks pretty close to the index. CFAI likes to hide behind the “best answer” copout and I don’t think you can make a legitimate case that this is a pure matching or active portfolio. So, in my head, unless I see a pretty large difference in duration I am not going to rule out enhanced index without other reasons to support doing so.