African Capital Investment Company (ACIC) has decided to open a branch in Ghana as a first step in diversifying its equity portfolios to incorporate emerging market assets. They are therefore assessing the performance of three funds that have been suggested to them by their local consultant. The three funds are: (a) Alpha Fund which caters to the investment needs of students and lecturers (b) Gamma Fund which is meant for nurses and medical doctors (c) GSE Fund which is set up to mimic the GSE-All Share Index Their decision to locate in Ghana is dependent on their perceived performance of the various funds already operating in the country. They have gathered five years of return data and other basic statistics on the funds; which are presented below: Alpha Fund Gamma Fund GSE Fund for All Return (%) Return (%) Shares Return (%) Year 18.5 24.3 18.3 2 10.3 9.4 4.7 3 -9.2 18.8 16.2 4 20.1 -12.6 31.4 14.3 20.4 -3.3 Beta Coefficient 0.34 0.55 1.00 Mean Return 10.80 12.06 13.46 Standard Deviation 10.57 13.27 11.92 The five-year average return on the Government of Ghana One Year Treasury Note is 5.0%. Based on the information above they have asked you to present to them your assessment of the performance of the above funds using the following performance measurement indexes: (a) Sharpe's Performance Index (b) Treynor's Performance Index (c) Jensen's Performance Index and In each case indicate which fund performed best
African Capital Investment Company (ACIC) has decided to open a branch in Ghana as a first step in diversifying its equity portfolios to incorporate emerging market assets. They are therefore assessing the performance of three funds that have been suggested to them by their local consultant. The three funds are: (a) Alpha Fund which caters to the investment needs of students and lecturers (b) Gamma Fund which is meant for nurses and medical doctors (c) GSE Fund which is set up to mimic the GSE-All Share Index Their decision to locate in Ghana is dependent on their perceived performance of the various funds already operating in the country. They have gathered five years of return data and other basic statistics on the funds; which are presented below: Alpha Fund Gamma Fund GSE Fund for All Return (%) Return (%) Shares Return (%) Year 18.5 24.3 18.3 2 10.3 9.4 4.7 3 -9.2 18.8 16.2 4 20.1 -12.6 31.4 14.3 20.4 -3.3 Beta Coefficient 0.34 0.55 1.00 Mean Return 10.80 12.06 13.46 Standard Deviation 10.57 13.27 11.92 The five-year average return on the Government of Ghana One Year Treasury Note is 5.0%. Based on the information above they have asked you to present to them your assessment of the performance of the above funds using the following performance measurement indexes: (a) Sharpe's Performance Index (b) Treynor's Performance Index (c) Jensen's Performance Index and In each case indicate which fund performed best
Chapter21: International Cash Management
Section: Chapter Questions
Problem 16QA
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Transcribed Image Text:Question Four (B)
African Capital Investment Company (ACIC) has decided to
open a branch in Ghana as a first step in diversifying its
equity portfolios to incorporate emerging market assets. They
are therefore assessing the performance of three funds that
have been suggested to them by their local consultant. The
three funds are:
(a) Alpha Fund which caters to the investment needs of
students and lecturers
(b) Gamma Fund which is meant for nurses and medical
doctors
(c) GSE Fund which is set up to mimic the GSE-All Share
Index
Their decision to locate in Ghana is dependent on their
perceived performance of the various funds already operating
in the country. They have gathered five years of return data
and other basic statistics on the funds; which are presented
below:
Alpha Fund Gamma Fund GSE Fund for All
Return (%) Return (%) Shares Return (%)
Year
18.5
24.3
18.3
2
10.3
9.4
4.7
3
-9.2
18.8
16.2
4
20.1
-12,6
31.4
5
14.3
20.4
-3.3
Beta Coefficient
Mean Return
Standard Deviation
0.34
0.55
1.00
10.80
12.06
13.46
10.57
13.27
11.92
The five-year average return on the Government of Ghana
One Year Treasury Note is 5.0%. Based on the information
above they have asked you to present to them your assessment
of the performance of the above funds using the following
performance measurement indexes:
(a) Sharpe's Performance Index
(b) Treynor's Performance Index
(c) Jensen's Performance Index and In each case indicate
which fund performed best
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