Explanation:
The committee must not rely entirely only on past performance to decide on the strategy to be adopted. It is often observed that an investor’s previous success is not a guarantee of future performance.
Ultimate access to all questions.
Q.2591 A large investment firm manages multiple funds. The investment committee decides on the investment strategy and takes the final decision on the investment opportunities available in the market. While making the investment decision, the committee relies heavily on the past performance of a similar strategy. The Chief Investment Officer (CIO) heads the investment committee with fund managers as members. The firm carries out a performance appraisal of its fund managers quarterly, and the CIO heads the appraisal committee.
Which of the following statements is most accurate?
A
Past performances often predict future performances; hence, the committee must rely on past performances as its best quantitative tool.
B
The committee must not rely entirely only on past performances to decide on the strategy.
C
The committee must examine at least the past 10 years of performances to select a strategy.
D
The committee must examine performance data since the firm's inception to select a strategy.
No comments yet.