Data Analysis and Interpretation Flashcards

A fund fact sheet shows a fund's 1-year return of 15%, but the benchmark returned 18% over the same period. What does this suggest?

Answer: The fund underperformed its benchmark by 300 basis points

The fund returned 15% vs. the benchmark's 18%, meaning it underperformed by 3 percentage points (300 basis points).

Which data point in a Fund Facts document would best help an investor assess the consistency of a fund's year-over-year performance?

Answer: The year-by-year returns table

The year-by-year returns table shows performance across multiple calendar years, allowing assessment of consistency and volatility.

An investor sees a fund's 10-year average annual return is 7%, but in the most recent year it returned -5%. Which statement is most accurate?

Answer: Short-term performance can deviate significantly from long-term averages

Short-term returns can vary widely from long-term averages; a single bad year does not negate historical performance trends.

What does a fund's maximum drawdown metric measure?

Answer: The largest peak-to-trough decline in the fund's value over a period

Maximum drawdown measures the largest percentage drop from a historical peak to a subsequent trough, capturing worst-case loss scenarios.

A fund's Sharpe ratio is 0.8 and a comparable fund has a Sharpe ratio of 1.2. What can be concluded?

Answer: The second fund provides better return per unit of risk

A higher Sharpe ratio indicates more return earned per unit of risk taken; 1.2 > 0.8 means the second fund is more efficient.

When a fund's net asset value per unit (NAVPU) drops from $25.00 to $22.50, what is the percentage decline?

Answer: -10%

Percentage change = ($22.50 - $25.00) / $25.00 × 100 = -$2.50 / $25.00 × 100 = -10%.

Which statistical concept describes how much individual return observations deviate from the average return of a fund?

Answer: Variance

Variance measures the average squared deviation of returns from the mean, quantifying how spread out the returns are.