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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers

A PMS portfolio is worth Rs 50,00,000 at the start of the year and Rs 58,00,000 at the end, with no inflows or withdrawals. Its benchmark returned 12% over the year. What is the portfolio's excess return over the benchmark?

The excess return is 4%. The portfolio grew from Rs 50 lakh to Rs 58 lakh, a 16% return, and subtracting the benchmark's 12% leaves a positive 4% outperformance over the benchmark for the year.

  1. A4%Correct
  2. B16%
  3. C28%
  4. D-4%

Explanation

Portfolio return = (58,00,000 - 50,00,000) / 50,00,000 = 16%. Excess return = 16% - 12% = 4%. Choosing 16% ignores the benchmark. Reversing the subtraction gives -4%.

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