Question 13

A portfolio manager for the Matrix Tactical Growth Fund, a mutual fund with total assets of $225 million. The mandate of the mutual fund is to make active tactical shifts in long and short exposure based on current views of stock market action. Recently, the manager has been cautious on stocks and has positioned the fund with a beta of –0.30; however, the most recent jobless claims were more positive than he expected, and he expects the stock market to rally strongly when the monthly non-farm payroll data is released. The manager would like to take advantage of this market rally using S&P 500 index futures and increase the fund's beta to 1.25. Currently, S&P 500 futures are trading at 5,400 and the multiplier is 250. How can the portfolio manager achieve his objective for his fund?