Total active return - interpreting the numbers

CFA Level III Equities
#1

Sch book 3 LOS 23s Pg 151

Need guidance

True active return =manager’s total return- manager’s normal portfolio return

A positive number means a manager earned positive alpha when compared to his specific style benchmark

A negative number means a manager earned negative alpha (poor performed) when compared to his specific style benchmark

misfit active return =manager’s normal portfolio return- investor’s benchmark return

A positive number means a manager earned positive….

A negative number means a manager earned negative…

Can anyone please fill the blanks for the interpretation of the numbers.

Also can the above be applied to all strategies (passive, enhanced indexing and active)

Kindly help

#2

I just finished looking at the example on p. 219 and I think I have an understanding of it. A positive number shows how much active return is being overstated due to the investor using the wrong benchmark. Look at a positive number as the return that the manager is incorrectly being rewarded. A negative misfit return then is how much the true return is being understated, or unfarly punished. Either way, the manager earned the true return and it’s not affected by misfit return. Misift return is based on the investor’s incorrect evaluation of the performance.