Question

See the allocation below. Based only on this information, which fund manager(s) would you fire, and why?

EQUITIES allocation return Benchmark return

Domestic Large Cap 41% -4.97% -7.11%

Domestic Mid Cap 10% -14.51% -13.81%

Developed ex US 14% -4.97% -6.11%

FIXED INCOME Core Bonds 27% 3.9% 2.96%

Sustainable Bonds 7% 5.84% 4.51%

Cash 1% N/A N/A

Answer 1

Answer :
Manager of Domestic Mid Cap fund has performed poor than the benchmark.So, he can be fired.
Explanation :
Asset Class	Allocation	Return	Benchmark Return	Manager's Perfromance
Equities Domestic Large Cap	41%	-4.97%	-7.11%	Better than benchmark
Domestic Mid Cap	10%	-14.51%	-13.81%	Underperformed
Devloped ex US	14%	-4.97%	-6.11%	Better than benchmark
Fixed Income Core Bonds	27%	3.90%	2.96%	Better than benchmark
Sustainable Bonds	7%	5.84%	4.51%	Better than benchmark
Cash	1%
	100%
Domestic mid cap portfolio has underperformed with respect to the benchmark. It means , it has relatively performed poor than the benchmark. Domestic mid cap earned a return of -14.51% wheraes benchmark did better than fund, with -13.81%
Managers performance is measured on relative basis with the benchmark. As manager follow similar portfolio spread and usually follow active fund management, they are expected to earn higher return than benchmark. Or fall less than the benchmark in case of negative event.
Fixed income core bonds and sustainable Bonds has earned higher return than the benchmark.
Whereas, Domestic large cap and Developed has fallen less than the benchmark.So performed better than index.