Active Return

CFA Level III
#1

So if you see a question asking you to calculate “active return” and you see the following items, what would be your answer? Return of portfolio = 10% Benchmark = 12% Investor’s Normal Benchmark (same style) = 9%

#2

if “return of portfolio” is the manager’s return and “investor’s normal benchmark” is the managers normal benchmark, then 1%.

#3

-2%

#4

I knew throwing out this question would raise some confusion. From my understanding, “Active return” is the return from the broad benchmark, the TRUE active return is the one from the investor’s normal benchmark. Is that the correct answer? Confirmation please.

#5

true active is more precise but total active is what mostly use depends on the question

#6

not investor’s normal but manager’s normal portfolio

#7

total active return = 1 assuming benchmark is the managers benchmark true active return = 10-12 =-2 misfit = 12-9=3

#8

pimpineasy Wrote: ------------------------------------------------------- > total active return = 1 > assuming benchmark is the managers benchmark > true active return = 10-12 =-2 > > misfit = 12-9=3 My answer… Although I don’t know why you put (same style) that confuses me.

#9

Return of portfolio = 10% Broad market Benchmark = 12% Manager’s Normal Portfolio return = 9% Sorry thats just the way I remember it in my head (how I wrote it before)

#10

Para dont understand what u mean exactly?

#11

pimpineasy Wrote: ------------------------------------------------------- > Para dont understand what u mean exactly? I was talking about Soccer. I would have put your answer from his first post. His part where it said same style through me off.

#12

omg I think I might be the one person who writes questions poorer than the BSAS… True active return = manager’s total return - manager’s normal portfolio return Misfit active return = manager’s normal portfolio return - investor’s benchmark I wanted to know what the “active return” was… aka manager’s total return - investor’s benchmark

#13

Soccertom9 Wrote: ------------------------------------------------------- > Return of portfolio = 10% > Broad market Benchmark = 12% > Manager’s Normal Portfolio return = 9% > > > Sorry thats just the way I remember it in my head > (how I wrote it before) True Active +1 Active -2 Misfit -3

#14

Paraguay Wrote: ------------------------------------------------------- > Soccertom9 Wrote: > -------------------------------------------------- > ----- > > Return of portfolio = 10% > > Broad market Benchmark = 12% > > Manager’s Normal Portfolio return = 9% > > > > > > Sorry thats just the way I remember it in my > head > > (how I wrote it before) > > True Active +1 … dont you mean total? > Active -2 /…dont u mean true? > Misfit -3 from memory

#15

Soccertom9 Wrote: ------------------------------------------------------- > omg I think I might be the one person who writes > questions poorer than the BSAS… > > True active return = manager’s total return - > manager’s normal portfolio return > Misfit active return = manager’s normal portfolio > return - investor’s benchmark > > I wanted to know what the “active return” was… > aka manager’s total return - investor’s > benchmark Wrong on the definition of misfit: Misfit active return = manager’s normal BENCHMARK return - investor’s benchmark.

#16

pimpineasy Wrote: ------------------------------------------------------- > Paraguay Wrote: > -------------------------------------------------- > ----- > > Soccertom9 Wrote: > > > -------------------------------------------------- > > > ----- > > > Return of portfolio = 10% > > > Broad market Benchmark = 12% > > > Manager’s Normal Portfolio return = 9% > > > > > > > > > Sorry thats just the way I remember it in my > > head > > > (how I wrote it before) > > > > True Active +1 … dont you mean > total? > > Active -2 /…dont u mean > true? > > Misfit -3 > > > from memory Managers style underperformed 3% to the broad index. Manager outperformed style by 1%. -3 + 1 = -2. That is just how I remember it from doing it every day.

#17

hmmmmm refer to cfai vol4 page 259 to see what i mean

#18

pimpineasy Wrote: ------------------------------------------------------- > hmmmmm refer to cfai vol4 page 259 to see what i > mean Managers “true” active return = Manager’s return - Manger’s normal benchmark. 10 - 9 = 1 Manager’s misfit active return = Manager’s normal benchmark - Investors benchmark. = 9 - 12 = -3. Total active return = 1 - 3 or -2. I don’t get it, isn’t that what I had?

#19

forget it never no mind i know what u mean and i know what i mean …its fine sorry for distracting