Primo Management Company is looking at how best to use benchmarks to evaluate the performance of its managers. The company
has hired Sally Jones, CFA, to educate the managers on the best methods for constructing a benchmark portfolio, how to choose the
best benchmark, whether the style of the fund under management matters, and what they should do with their global funds in terms of
benchmarking.
Jones put together some 2-year performance numbers comparing Primo's current domestic funds to a potential benchmark.
Weight
Return
Style Category
Primo
Benchmark Primo
Benchmark
Large-cap growth
0.60
0.50
17%
16%
Mid-cap growth
0.15
0.40
24%
26%
Small-cap growth
0.25
0.10
20%
18%
As part of her analysis, Jones also takes a look at one of Primo's global funds. In this particular portfolio, Primo is invested 75% in Dutch
stocks and 25% in British stocks. The benchmark is invested 50% in Dutch stocks and 50% in British stocks. On average, the British
stocks outperformed the Dutch stocks. The euro appreciated 6% versus the U.S. dollar over the holding period while the pound
depreciated 2% versus the dollar. In terms of the local return, Primo outperformed the benchmark with the Dutch investments but
underperformed the index with respect to the British stocks.
What is the within-sector selection effect for each individual sector?
Note: Round your answers to 1 decimal place. Negative amount should be indicated by a minus sign.
Large-cap growth
%
Mid-cap growth
%
Small-cap growth
%
Total within-sector selection
%
