HI
My turn!lol
Before i continue, i draw your attention to some notes form ST5 - (ST5 - CHAPTER15 PAGE 3 onwards in paticular page 8, where it states that MWRR is an absolute measure of return, but not good basis for comparing two managers as influenced by timing size of cashflows etc...)
-i have copied the CA3 question below from the paper so we can refer to it (now on teh website)
"Draft a letter in about 500 words to the member trustee explaining how the investment manager's performance compares with the benchmark, and how the investment return has been affetced by pattern of payments and fluctuations in investment conditions"
interpretation - it seems two clear tasks ( (1) & (2) below ) asked to address here
1) Investment performance
- trustee quoted Managers MWRR
- Is affected by payments in and out of scheme
- returns poorer in 2nd half, but higher in 1st half
- most money invested in 2nd half of year when stock market returns poor
- MWRR would have been higher if most money invested in 1st half
- as MWRR influenced by timing+ size, is not good for comparing managers performance with benchmark
2) Comparison with benchmark
- trustee compared mangers MWRR with benchmark TWRR
- not like for like
- compare TWRRs as unaffected timing /size payments
- both comparable (mangers TWRR slightly higher)
- manger slightly outperformed benchmark (when returns on like for like basis)
ok i didnt do exactly this in exam, but on reflection i would have done something like this, and explained with example how MWRR is affected by timing size etc with the intro + conclusion etc....
can someone educate me on my errors of interpretation? (PS dont be scared to tell me how wrong I am, it is only an exam, & i am not going to sink into some depressive state over how far out i may be etc, i would actually like to learn for future)
Last edited by a moderator: Oct 11, 2007