Reading 35 portfolio performance evaluation, EOC qns2 pg238

CFA Level III Portfolio Management
#1

Hello

EOC Qns 2-"the most appropriate risk attribution approach for the fixed-income manager is to:
-Given answer is C-attribute tracking risk to relative allocation and selection decisions.

I relook to the itemset but there is no mention that the Fixed income portolio performance is relative to a benchmark? My initial thought is B can be the correct answer. Anyone has any thoughts?

Thanks!

#2

I don’t find any info on the portfolio having a benchmark also. Nor is there any info in the errata.

Best to write to CFA Institute to clarify.

#3

It’s there, but it’s subtle.

Exhibit 1 gives, amongst other things, these values:

  • Upside capture: 0.66
  • Downside capture: 0.50

You cannot calculate those values without a benchmark; therefore, a benchmark is implied.

Personally, I like that part of the question. I wish that I had thought of it.

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#4

Thanks both fino_abama & magician!

I have reach out to CFAI on it but no response from them so far.

@Magician- Agree with you as the information is relates to the later part of questions rather than earlier in the vignette.

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#5

@S2000magician response makes sense. However, I was able to eliminate answer B due to the answer mentioning “for each position”. This is a bottoms-up approach and based on the information, the FI manager is a top-down. That would have left A and C. With no mention of factors, I would most likely have eliminated that answer to arrive at choice C by default.

Thanks for asking this question as I literally wrote in my book, where is the reference to a benchmark and/or clarification of absolute target.

#6

Ahem: bottom up. :stuck_out_tongue: Little piglet that I am, I still found it funny!!! :wink: