Problem: utilities are 3% of benchmark, manager expects them to underperform. What’s the largest active weight he can take?
Options: 3%, 0%, -3%.
The correct answer is -3%. The logic is clear, but seriously?
What’s wrong with the question?
They want to underweight vs benchmark so best they can do is invest 0%. This is -3 versus benchmark (aka active weight).
-3 is not larger than 0.
Large in this sort of question means size, I think it is quite evident.
I think it’s quite fair, a lot better than some of the Schweser questions.
They mean the largest deviation from the bench. -3 being the farthest away from 3