Investments, tenth edition

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              1.  You  and  a  prospective  client  are  considering  the  measurement  of  investment  performance,  par-

ticularly with respect to international portfolios for the past 5 years. The data you discussed are 

presented in the following table:

  International 

Manager or Index  

  Total Return  

  Country and 

Security Return  

  Currency Return  

 Manager A 

  2 6.0% 

 2.0% 

  2 8.0% 

 Manager B 

  2 2.0  

 2 1.0  

 2 1.0 

 International Index 

  2 5.0 

  0.2 

  2 5.2 

     a.   Assume that the data for manager A and manager B accurately reflect their investment skills 

and that both managers actively manage currency exposure. Briefly describe one strength and 

one weakness for each manager.  

    b.   Recommend and justify a strategy that would enable your fund to take advantage of the 

strengths of each of the two managers while minimizing their weaknesses.     

   2.  Carl Karl, a portfolio manager for the Alpine Trust Company, has been responsible since 2015 

for the City of Alpine’s Employee Retirement Plan, a municipal pension fund. Alpine is a 

growing community, and city services and employee payrolls have expanded in each of the past 

10 years. Contributions to the plan in fiscal 2020 exceeded benefit payments by a three-to-one 

ratio. 

 The plan board of trustees directed Karl 5 years ago to invest for total return over the long 

term. However, as trustees of this highly visible public fund, they cautioned him that volatile or 

erratic results could cause them embarrassment. They also noted a state statute that mandated that 

not more than 25% of the plan’s assets (at cost) be invested in common stocks. 

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  Portfolio Performance Evaluation 

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 At the annual meeting of the trustees in November 2020, Karl presented the following portfo-

lio and performance report to the board: