The vignette reads: Ptf manager is allowed to deviate slightly from the index (…). He is authorized to alter the portfolio duration within a specified range, to take advantage (…) Here’s the Q’s and choices: The manager utilizes which approach to bond ptf mgt A) enhanced indexing by matching primary risk factors B) Active mgt by larger risk factor mismatches C) Indexing by minor risk mismatches My answer was B since in enhanced indexing you are supposed to keep the duration of the ptf in line with the index’s duration. Schweser answer is C Are they wrong? Thanks J.
duh… I was thinking it should be Active Management (Large Factor Mismatch) - B?
That’s exactly what I’m saying. From what I remember, CFAI was pretty clear that duration of the ptf needed to be the same as duration of the index in all approaches that range from full replication to enhanced indexing: minor mismatches… Anyway, it wouldn’t be the first time Schweser was wrong… J.
Yeah dude, it’s B. Duration is a large factor mismatch.
B
Yup, read page 10 of V4 CFAI. for Enhanced “While matching duration”…for Active Mgmt by larger ris factor mismatches "The manager may…or adjust the portfolio’s duration SLIGHTLy away from bench. Full blown would remove the “slightly” and let the manager have free range.
B
Same … it should be B
Seen a couple of questions like this in some exams and it has always been B
I think the terms “slightly” and “within a specified range” are leading us to C. As with most Schweser questions, it’s a terrible question.
wow I’m growing less fond of schweser by the way. this looks pretty clearly to be B.