NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Performance Measurement and Evaluation of Portfolio Managers
A PMS portfolio was worth Rs 50,00,000 at the start of the year and Rs 58,00,000 at the end. There were no inflows or outflows during the year. Its benchmark returned 12% over the same year. What is the portfolio's excess return over the benchmark?
The portfolio return is 16 percent, being a gain of Rs 8 lakh on Rs 50 lakh. Subtracting the benchmark return of 12 percent gives an excess return of 4 percentage points.
- A4 percentage pointsCorrect
- B16 percentage points
- C8 percentage points
- D28 percentage points
Explanation
Portfolio return = (58,00,000 - 50,00,000) / 50,00,000 = 16%. Excess return = 16% - 12% = 4 percentage points. Using 8 confuses the rupee gain in lakh with a percentage; 28 wrongly adds the returns.
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