Shown below are the investment weights for the securities held in four different portfolios: three mutual funds and the benchmark index that each of those funds uses.  % Security Investment Weight:SecurityBenchmark IndexFund XFund YFund Z110%12%40%11%210%13%0%9%310%8%5%9%410%15%0%9%510%7%0%11%610%10%0%11%710%5%30%9%810%14%0%11%910%6%0%11%1010%10%25%9% a. Calculate the active share (AS) measure for Fund X, Fund Y, and Fund Z relative to the benchmark index.b. Using these active share calculations, indicate which fund is the most likely to be considered: (i) a passive index fund, (ii) a closet (or enhanced) index fund, and (iii) an actively managed concentrated stock-picking fund. Explain the reason for your classification.

Question
Asked Mar 25, 2019
Shown below are the investment weights for the securities held in four different portfolios: three mutual funds and the benchmark index that each of those funds uses.

 

  % Security Investment Weight:
Security Benchmark Index Fund X Fund Y Fund Z
1 10% 12% 40% 11%
2 10% 13% 0% 9%
3 10% 8% 5% 9%
4 10% 15% 0% 9%
5 10% 7% 0% 11%
6 10% 10% 0% 11%
7 10% 5% 30% 9%
8 10% 14% 0% 11%
9 10% 6% 0% 11%
10 10% 10% 25% 9%

 

a. Calculate the active share (AS) measure for Fund X, Fund Y, and Fund Z relative to the benchmark index.
b. Using these active share calculations, indicate which fund is the most likely to be considered: (i) a passive index fund, (ii) a closet (or enhanced) index fund, and (iii) an actively managed concentrated stock-picking fund. Explain the reason for your classification.
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Expert Answer

Step 1

a.

Formula for calculation of active share (AS):

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Step 2

Excel calcualtion of active share measure for fund X, fund Y, and fund Z:

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Step 3

Excel workings:

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