A portfolio is comprised of three index funds: an equity index comprising 40% of

Question

A portfolio is comprised of three index funds: an equity index comprising 40% of the total portfolio, a bond index comprising 30% of the total portfolio and an international index comprising 30% of the total portfolio. After each quarter the portfolio manager buys and sells some of each sector so as to preserve the original weights for each sector. This is an example of ____________.

Select one:

a. a passively managed core with an actively managed component

b. a totally passively managed fund

c. passive asset allocation with active security selection

d. active asset allocation with passive security selection

Explanation / Answer

The above statement is an example of a totally passively managed fund. This is because the returns are based purely on indexes and the manager plays a role of only managing the weights of the fund.

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