NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Portfolio Management Process
A PMS portfolio was worth Rs 50,00,000 at the start of the year and Rs 57,50,000 at the end, with no inflows or outflows. Its benchmark returned 12%. What is the portfolio's excess return over the benchmark?
The excess return is 3%. The portfolio grew from Rs 50 lakh to Rs 57.5 lakh, a 15% return, and subtracting the benchmark's 12% leaves 3 percentage points of outperformance.
- A3%Correct
- B15%
- C27%
- D7.5%
Explanation
Portfolio return = (57,50,000 − 50,00,000)/50,00,000 = 15%. Excess return = 15% − 12% = 3%. The 15% option is the raw return, ignoring the benchmark; 27% wrongly adds the two.
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