Navigating Ethical Dilemmas in Portfolio Management

James is a portfolio manager with XYZ Investments. He discovers that one of his company's mutual funds has underperformed significantly relative to its benchmark. As he reviews the fund's holdings, James finds that a large position in a certain stock, which he personally believes to be overvalued, is consistently dragging down performance. Despite this, his supervisor instructs him to continue holding the stock until the next quarterly report, citing client sentiment and the potential for future recovery.

Faced with this ethical dilemma, James must decide how to proceed. He considers the implications of his decision on the firm, clients, and his own professional integrity.