Financial Risk Manager Part 2

Get started today

Ultimate access to all questions.

Explanation:

Optimal weight = $\frac{\text{IR}_i}{\text{IR}_p} \times \frac{\text{Portfolio TEV}}{\text{Manager's TEV}}$

Optimal weight Manager 1 = $\frac{(0.5 \times 0.03)}{(0.6 \times 0.05)} = 50\%$
Optimal weight Manager 2 = $\frac{(0.3 \times 0.03)}{(0.6 \times 0.04)} = 38\%$

Explanation:

Optimal weight = $\frac{\text{IR}_i}{\text{IR}_p} \times \frac{\text{Portfolio TEV}}{\text{Manager's TEV}}$

Optimal weight Manager 1 = $\frac{(0.5 \times 0.03)}{(0.6 \times 0.05)} = 50\%$
Optimal weight Manager 2 = $\frac{(0.3 \times 0.03)}{(0.6 \times 0.04)} = 38\%$

Comments (0)

No comments yet.

Q.2763 You have been provided the following information about two portfolio managers, and the overall portfolio:

Tracking error volatility (TEV) Information ratio
Manager 1 5% 0.5
Manager 2 4% 0.3
Portfolio 3% 0.6

Assuming the excess returns of the two managers are independent of each other, what will be the optimal asset allocation?

	Tracking error volatility (TEV)	Information ratio
Manager 1	5%	0.5
Manager 2	4%	0.3
Portfolio	3%	0.6

Exam-Like

Community

UAnonymous

Last updated: July 5, 2026 at 07:23

50% for Manager 1 and 38% for Manager 2

38% for Manager 1 and 50% for Manager 2

40% for Manager 1 and 60% for Manager 2

60% for Manager 1 and 40% for Manager 2