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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process

A PMS client's portfolio is worth Rs 50 lakh at the start of the year. It is Rs 56 lakh at the end of the year, with no additions or withdrawals. The benchmark returned 9% over the same year. What is the portfolio's excess return over the benchmark?

The excess return is 3 percentage points. The portfolio grew from Rs 50 lakh to Rs 56 lakh, a 12% return, and the benchmark returned 9%. Subtracting the benchmark return from the portfolio return gives the outperformance of 3 percentage points.

  1. A3 percentage pointsCorrect
  2. B12 percentage points
  3. C9 percentage points
  4. D6 percentage points

Explanation

Portfolio return = (56 - 50)/50 = 12%. Excess return = 12% - 9% = 3 percentage points. The figure 6 is the rupee gain in lakh, not a percentage excess. 12 ignores the benchmark, and 9 is the benchmark return itself.

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