Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core larg

Question

Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash.

    Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market-timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P

Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash.

    Blakely was able to produce exceptional returns last year (as outlined in the table below) through her market-timing and security selection skills. At the outset of the year, she became extremely concerned that the combination of a weak economy and geopolitical uncertainties would negatively impact the market. Taking a bold step, she changed her market allocation. For the entire year her asset class exposures averaged 50% in stocks and 50% in cash. The S&P

Explanation / Answer

a. Calculation of sharpe ratio's: (Actual return - risk free return / standard deviation)

b. Calculation of M2 measure: [Actual return - risk free return / standard deviation) ] * Standard deviation of market + risk free rate.

M2 Measure for miranda funds=(10.7 - 3) / 38 =0.20 = 0.20 *0.48 + 0.03 = 12.6%

c. Calculation of tryenor measure : (Actual return - risk free return / beta)

d. Calculation of Jensen measure (return of portfolio - [ Risk free rate+ Beta (Market return - risk free rate)]

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