Equity EOC 11C.

CFA Level III Equities
#1

Stuck on a question logic wise.

Question asks for the Active risk and IR. When using the weighted average of the Index and Semi-active manager, they use the Active risk with respect ot the normal benchmark or the True Active Risk.

There was no information given for Misfit Active risk for the two managers.

If I was calculating IR, I would use the Total Active Risk = ROOT [True Active risk squared + Misfit sqaures].

Why here, are they only using True Active RIsk?

Thanks, much appreciated.

#2

Im assuming now it’s because the overall equity portfolio benchmark is the Russell 3000.

If it wasn’t, then misfit risk would be a concern correct?

Thanks,