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Which of indexing, enhanced indexing, and active investment management tends to have the higher information ratio?

Enhanced indexing or semi-active management because of strict control of tracking error.

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Standard III(E) – Preservation of Confidentiality covers which clients?

All former, existing, and perspective clients.

Information to be kept confidential unless disclosure is required by relevant legal authority or permission given by client.

Under GIPS what is not considered a real estate investment?

  1. Publicly traded real estate securities including REITs and REOCs that trade on a public exchange.
  2. Mortgage-backed securities
  3. Any private investment in property where the investor’s return is entirely related to interest rates and completely detached from the performance of the underlying asset.

Under GIPS what is considered a real estate investment?

  1. Direct holdings in property (full or partial)
  2. Commingled Real Estate funds, separate accounts and unit trusts.
  3. Private placement (unlisted) securities issued by REITs and REOCs.
  4. Any private interest in a property where at least some portion of the investor’s return is linked to the performance of the underlying.
  5. Real Estate close-end Private Equity funds.

A performance quality control chart has 3 criteria:

  1. An initial testable null hypothesis that the manager has no skill.
  2. An assumption that value added returns are normally distributed.
  3. An assumption that the manager’s investment process is consistent over time.

Evidence of a skillful manager is performance above a benchmark and outside the confidence band on a consistent basis.

A needs-trustworthy-agent focus is appropriate when?

Low-level advertising is required during execution and the trades are sensitive to possible information leaks.

It is lease appropriate when a trade requires a high certainty of execution.

Direct market access is most suitable for trades which are:

  • Small compared to daily volume
  • On a liquid stock
  • On a well-organized market

Liquidity at any cost is a trading tactic for ____ in institutional block size. Liquidity at any cost tactics are typically used by ____ traders who require ____.

Liquidity at any cost is a trading tactic for immediate execution in institutional block size. Liquidity at any cost tactics are typically used by information-motivated traders who require timely execution.

A returns-based benchmark is:

  • A special type of factor-model-based benchmark created by William Sharpe.
  • A weighted-average composite of a portfolio’s sensitivities to various style indexes.
  • All factor sensitivity scores used to create the benchmark must sum to 1 and none can be negative.

Should a valid benchmark be widely available?

No

Custom benchmarks can be valid and do not necessarily trade widely, the individual components of the custom benchmark should be investible.