Portfolio Performance Analysis

ABC Capital Management is one of the most prestigious asset management companies in the country. It has been managing the wealth of America for over 100 years. It utilizes various forms of fundamental, technical, and quantitative analyses in the design and implementation of its several investment strategies and portfolios. Today, ABC Capital is a global investment management firm that continues to focus on rigorous research and the development of innovative, practical investment strategies. Because of this, ABC Capital is able to achieve the goals of its clients: individuals, pension funds, endowment funds, banks, insurance companies, foundations, and sovereign wealth funds.

You work as a junior portfolio manager with ABC Capital. As a part of the ongoing due diligence process, your supervisor wants to see whether you can properly assess a portfolio’s performance. The company provides you with 3 portfolios, their performance records, and 3 different benchmarks to analyze. Assume broad market returns are 8% annually and use the current 1-year treasury yield.

In the Word document provided below, explain the following:

Most appropriate benchmark for each portfolio and include an explanation.
Risk-adjusted return, Sharpe ratio, and Treynor ratio.
Whether the portfolio under- or over-performed in comparison to that benchmark based on the principles of the capital and security market lines, including the calculations to justify your answers.
Support your findings by showing your calculations in the spreadsheet provided below. Include:

Risk-adjusted returns of the portfolios (Sharpe Ratio and Treynor Ratio).

Sample Solution