Hello guys! I was wondering if an answer such as : appropriate benchmark = peer group of similar managers = for instance HFR Market Neutral would have been accepted is this case? Part C The appropriate benchmark for Fund B is the risk-free rate, 2%. A market-neutral portfolio carries no systematic risk, therefore has a zero beta and should be measured against the risk-free rate.
I don’t think that would have been accepted. Peer groups are not considered the most appropriate benchmarks (survivorship biases, ambiguous)
HFR MN is a real hedge fund index by the way.
The only valid trait about a manager universe/peer index is that it is measurable. It fails all the other 6.
That too after the fact.
Would be a very tricky question I think if they had something like the HFR MN and the risk free rate as choices…I doubt they’d ever do that, but if they did I’d go with the risk free rate for the reasons stated above.