Main differences of Zeus from its main competitor are its customer-oriented services, their core strategy of teamwork and they used municipal bond fund to purchase securities. Estimation of risk-adjusted returns is important to Zeus as In Zeus opinion, investors will not pay for the higher return generated by merely taking the higher risk. Investors demand Zeus to utilise professional skills to provide them with a return above the benchmark. There are also advantages and disadvantages of each of the risk-adjusted return measures employed, making some of them to be better applied to a specific type of fund comparison than the others.
Zeus Asset management is a fund management firm founded in 1968 in…show more content… Measuring systematic and idiosyncratic risk.
Merely a ranking criterion. Number value is not economically meaningful
Normal distribution assumption result in bias.
Treynor ratio: measure return in excess of the risk free rate relative to systematic risk.
It can be compared with the benchmark performance or other portfolio with the same benchmark.
Only useful as a sub-portfolio measure of a board or fully diversified portfolio.
Jasen’s Alpha: measures the average return on portfolio over and above that predicted by CAPM.
Limitation: An absolute measure does not adjusted for any risk. It is not able behave proportionally to the level of required return of portfolio.
Information ratio: the information ratio divides the alpha of the portfolio by the nonsystematic risk.
Limitation: it relies on a measure of standard deviation. It does not present the averaging property.
For Zeus, risk-adjusted return is very important due to several reasons:
By analyzing the performance of the various mutual funds, it would help the company to establish its internal rules regarding the level or risk and return.
They can use this method to measure the excess return they earned for each unit of risk they take.
It is more comparable to the benchmark and other portfolios with different structure and risk level.
Zeus’s equity fund aim for long-term growth of capital through investments in a