Evaluate Driscoll Fund's Performance against S&P 500

Hard Performance Evaluation Performance Appraisal

As a portfolio manager, you are reviewing the performance of a discretionary equity fund over the past year. The fund has a stated benchmark of the S&P 500 Index. For the year, the fund returned 15%, while the S&P 500 returned 10%. In addition to the raw return comparisons, the firm uses the Sharpe Ratio and Jensen's Alpha to assess performance. The fund has a standard deviation of returns of 8%, and the risk-free rate for the year was 2%.

Given this data, which of the following statements regarding the fund's performance evaluation is correct?

The fund outperformed the benchmark in terms of raw returns but has a lower Sharpe Ratio than the benchmark.

The fund's Jensen's Alpha is positive, indicating it has generated excess returns above the benchmark after adjusting for risk.

The fund's Sharpe Ratio is less than the risk-free rate, suggesting the risk-adjusted performance is undesirable.

Hint

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