This comes from ASSET April 2004, Q4. The solution works out quarterly performance figures for: a) Benchmark allocation and benchmark assets to be: Q Return (%) 1 2.4 2 -6.695 3 2.888 4 3.063 b) Actual allocation and actual assets to be: Q Return (%) 1 -7.083 2 -1.544 3 4.68 4 31.94 This gives difference actual - benchmark as: Q Return (%) 1 -9.483 2 5.16 3 1.79 4 28.88 Now it states "adding together the quarterly out performances gives an overall relative out performances over the year of 26.3%". I am suspicious of this, how can you just add up the quarterly returns? Surely it should have been doing (1 + diff1) x (1 + diff2) x ... x (1 + diffn) - 1??? (as this is basically a TWRR) This is materially different to the stated answer (would give 24.9%). What do you think?
