Performance Evaluation and Appraisal of Investment Portfolio

As a portfolio manager, you are responsible for assessing the performance of your client's investment portfolio over the past year. The client's portfolio has a blend of domestic equities, international equities, and fixed income securities. You have been provided with the following information:

• The portfolio's return for the year was 9%.
• The benchmark return for the same period was 7%.
• The asset allocation of the portfolio is 60% in domestic equities, 30% in international equities, and 10% in fixed income.
• The risk-free rate for the year was 2%.

Using the information above, evaluate the performance of the portfolio relative to the benchmark. Discuss the concepts of alpha and beta, and explain how both of these metrics can provide insight into the portfolio manager's performance. Finally, consider the implications of the results for future investment decisions.