LOS l: Discuss the criteria for selecting a fixed-income manager.

Q1. Executives of a company are in the process of hiring managers for the company’s fixed-income portfolios. The company will hire two managers. In selecting the managers, all other things being equal, it is optimal to hire managers whose alphas have been:

A)   positive and are highly correlated.

B)   negative and are uncorrelated.

C)   positive and are uncorrelated.

Q2. In choosing equity managers, firms frequently use consultants and make choices using qualitative factors such as philosophy, market opportunity, and delegation of responsibility. In choosing a fixed-income manager, firms:

A)   frequently use consultants and make choices using qualitative factors.

B)   never use consultants but do make choices using qualitative factors.

C)   frequently use consultants but never make choices using qualitative factors.

Q3. When the sponsor is choosing a fixed-income manager, with respect to the fees the manager charges, the evidence shows:

A)   that there is no relationship between fees and information ratios.

B)   that fixed-income managers with the highest fees have the lowest information ratios.

C)   that fixed-income managers with the highest fees have the highest information ratios.

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Q1. Executives of a company are in the process of hiring managers for the company’s fixed-income portfolios. The company will hire two managers. In selecting the managers, all other things being equal, it is optimal to hire managers whose alphas have been:

A)   positive and are highly correlated.

B)   negative and are uncorrelated.

C)   positive and are uncorrelated.

Correct answer is C)         

The company would want to hire managers who have a proven track record for adding value, i.e., who have had positive alphas. It is better to hire managers whose alphas are uncorrelated because that would lower portfolio risk.

Q2. In choosing equity managers, firms frequently use consultants and make choices using qualitative factors such as philosophy, market opportunity, and delegation of responsibility. In choosing a fixed-income manager, firms:

A)   frequently use consultants and make choices using qualitative factors.

B)   never use consultants but do make choices using qualitative factors.

C)   frequently use consultants but never make choices using qualitative factors.

Correct answer is A)

These are common steps in the process of choosing both equity and fixed-income managers

Q3. When the sponsor is choosing a fixed-income manager, with respect to the fees the manager charges, the evidence shows:

A)   that there is no relationship between fees and information ratios.

B)   that fixed-income managers with the highest fees have the lowest information ratios.

C)   that fixed-income managers with the highest fees have the highest information ratios.

Correct answer is B)

Just like the equity markets, a company should avoid hiring managers with higher fees. The evidence shows that fixed-income managers with the highest fees have the lowest information ratios.

[此贴子已经被作者于2009-3-6 10:57:06编辑过]

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