Explanation:
The main objectives of performance measurement tools are to assess whether the portfolio manager consistently outperforms their peers and the benchmark on a risk-adjusted basis. This includes evaluating the manager's skill by comparing their returns against an appropriate benchmark, adjusting for the risk taken, and attributing the sources of return.
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Q.3030 Lisa is a portfolio manager at Goldman Sachs Asset Management. She is responsible for a portfolio of stocks and bonds, and her performance is evaluated annually. The company has an evaluation system based on performance measurement tools, which include benchmark comparison, risk assessment, and return attribution. As part of the evaluation process, the firm uses a "green zone" system to flag any deviations in tracking error or performance. What are the main objectives of performance measurement tools as applied to Lisa's portfolio management at Goldman Sachs Asset Management?
A
The tools are used to forecast future returns and assess the potential market risks.
B
The tools are used to assess whether Lisa consistently outperforms her peers and the benchmark on a risk-adjusted basis.
C
The tools are used to identify the sectors or countries with the highest potential for investment.
D
The tools are used to evaluate the individual performance of each security in Lisa's portfolio.
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