For each of the past six quarters, Managers L and M have provided you with the total dollar value of the funds they manage, along with the quarterly contributions or withdrawals made by their clients. (Note: Contributions are indicated by positive numbers, withdrawals by negative numbers.) MANAGER L MANAGER M QuarterTotal Funds Under ManagementContributions/ WithdrawalsTotal Funds Under ManagementContributions/ WithdrawalsInitial                  500,000                              -                    700,000                              -  1                  527,000                    12,000                  692,000(35,000)2                  530,000                       7,500                  663,000(35,000)3                  555,000                    13,500                  621,000(35,000)4                  580,000                       6,500                  612,000(35,000)5                  625,000                    10,000                  625,000(35,000)For each manager, calculate:         a. Her money-weighted return         b. Her time-weighted return         c. Estimates of her quarterly performance returns using the Dietz approximation method, assuming that contributions/withdrawals are made exactly halfway through the quarter

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Asked Mar 19, 2019
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For each of the past six quarters, Managers L and M have provided you with the total dollar value of the funds they manage, along with the quarterly contributions or withdrawals made by their clients. (Note: Contributions are indicated by positive numbers, withdrawals by negative numbers.)
  MANAGER L   MANAGER M  
Quarter Total Funds Under Management Contributions/ Withdrawals Total Funds Under Management Contributions/ Withdrawals
Initial                   500,000                               -                     700,000                               -  
1                   527,000                     12,000                   692,000 (35,000)
2                   530,000                        7,500                   663,000 (35,000)
3                   555,000                     13,500                   621,000 (35,000)
4                   580,000                        6,500                   612,000 (35,000)
5                   625,000                     10,000                   625,000 (35,000)
For each manager, calculate:                  
a. Her money-weighted return                  
b. Her time-weighted return                  
c. Estimates of her quarterly performance returns using the Dietz approximation method, assuming that contributions/withdrawals are made exactly halfway through the quarter
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Expert Answer

Step 1

a.

Calculation of Money Weighted Return:         

The money weighted return can be calculated using a excel function =IRR, which denotes the internal return or interest rate of any investment. The excel spreadsheet with excel function is shown below:

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Step 2

The excel spreadsheet workings is shown below:

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Step 3

b.

Calculation of Time Weighted Return:

To calculate the time weighted return, it is required to calculate the Holding Period Return (HPR) initially. The holding period return is calculated using a ex...

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