Dalton decides to phone the funds to ask some specific questions. He asks the senior manager from Manager 2 about the recent change in investment strategy from growth to value. The manager replies that he exploits mispricings in emerging markets that arise because of their weak regulatory systems. He further notes that he had successfully implemented this strategy at his previous fund and is now training his current staff to follow this method.
Dalton finds out from Manager 1 that it offers both separately managed accounts (SMAs) and pooled vehicles. The manager suggests that its pooled vehicle will be better suited to Wood Valley’s needs.
Question
Based on his phone call with the senior manager from Manager 2, which of the following aspects of the fund’s investment philosophy should be of the greatest concern to Dalton?
A.The repeatability of the process
B.The structural inefficiencies identified
C.The behavioral inefficiencies identified
Solution
A Correct. Investment philosophy refers to a manager’s assumptions about market efficiency and the factors that drive performance. The recent change in style from growth to value for Manager 2 should be a concern for Dalton when assessing investment philosophy. Even though the manager notes that he has successfully implemented his strategy in a previous fund, it is not clear whether he can replicate those results in his new position with different staff. The staff is not currently trained in his strategy, and it is also not known whether the strategy was directed at emerging markets.
B Incorrect. As an active manager, Manager 2 is exploiting mispricings due to structural inefficiencies caused by regulatory systems, which may be long-lived, therefore making the strategy repeatable.
C Incorrect. Behavioral inefficiencies are created by the actions of other market participants, and none were identified here.
A投资风格的转变是否能持续确实是值得concern的，这我理解。
可以解读一下后两个在考试中的考察方式或者出题角度吗？我看课程中老师专门强调了behavior是短期带来的inefficiency，然后structural是长期的，所以我可以理解因为weak regulatory system的存在，所以PM决定exploits mispricings in emerging markets这个是长期有效的去进行主动投资的逻辑改变么？所以是从这个角度认为，这是长期存在的mispricing所以不需要有concern么？还是说虽然需要关注EM监管的变化看看mispricing是否会一直存在，但是A选项投资风格的改变才是更值得关注的，所以A更加符合本题的正确答案？