I went thru the hassle in the CFA mock (Q23) to determine the Misfit Return and then the true active return …then added them up to get to a Total Active Return. But then I noticed that total active return also works out to be the Manager Return - Investor Benchmark Return. Could some1 put my mind to rest and confirm this will always mathematically work? …putting the books away for the night b4 my mind unravels more concepts that I know cold.
Yes, the total active return is always the manager return minus the investor benchmark return.
I remember this as Total AR=MNNI. Not sure why, but it sticks w/me. 1. (M-N)+(N-I) M=Mgr return N= Normal Bench I=Investor’s Bench 1st term in 1 is True Active Retn 2nd term in 1 is Misfit Active Retn
hey sailaway that’s awesome, i think that’ll help me!