Financial Risk Manager Part 2
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Q-43. The AT&T pension fund has an allocation of $60 million devoted to U.S. equities. Now the fund wants to allocate this $60 million to two managers. This is equivalent to a risk budget of $3.948 million. Each manager has a TEV of 6%. The fund managers have different capabilities, their IRs are 0.6 (manager 1) and 0.4 (manager 2). To achieve an exact TEV of 4% and information ratio of 0.725, the weight for each should be?
Q-43. The AT&T pension fund has an allocation of $60 million devoted to U.S. equities. Now the fund wants to allocate this $60 million to two managers. This is equivalent to a risk budget of $3.948 million. Each manager has a TEV of 6%. The fund managers have different capabilities, their IRs are 0.6 (manager 1) and 0.4 (manager 2). To achieve an exact TEV of 4% and information ratio of 0.725, the weight for each should be?
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Manager1: 55.17%, Manager2: 36.78%
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