An investor wishes to choose between (1) two active Large Capitalized equity funds - A Large Capitalized Growth Fund and a Large Capitalized Value fund, OR (2) An active Large Capitalized Blend fund. Which of the following statements is incorrect?Group of answer choicesA Growth fund manager specializes in generating active returns/Alphas by analyzing firms that are will grow at a rate higher than their peersA Blend Fund combines the advantages of both investment styles (Value and Growth)A Blend Fund may be biased towards either Value or Growth during a particular period.A Value fund manager specializes in generating active returns/Alphas by analyzing firms that are priced lower than their peers in the industry based on some form of relative pricing analysis such as Price to Earning ratioA Blend fund is actually an index fund and is not an active fund.
Question
An investor wishes to choose between (1) two active Large Capitalized equity funds - A Large Capitalized Growth Fund and a Large Capitalized Value fund, OR (2) An active Large Capitalized Blend fund. Which of the following statements is incorrect?Group of answer choicesA Growth fund manager specializes in generating active returns/Alphas by analyzing firms that are will grow at a rate higher than their peersA Blend Fund combines the advantages of both investment styles (Value and Growth)A Blend Fund may be biased towards either Value or Growth during a particular period.A Value fund manager specializes in generating active returns/Alphas by analyzing firms that are priced lower than their peers in the industry based on some form of relative pricing analysis such as Price to Earning ratioA Blend fund is actually an index fund and is not an active fund.
Solution
The incorrect statement is: "A Blend fund is actually an index fund and is not an active fund."
This statement is incorrect because a blend fund is not necessarily an index fund. Blend funds, also known as hybrid funds, combine the investment styles of both growth and value funds. They can be actively managed, where the fund manager makes decisions about how to allocate assets, or passively managed like an index fund, where the fund's portfolio mirrors a market index. Therefore, saying that a blend fund is actually an index fund and is not an active fund is incorrect.
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