CIPM Level II Practice Questions - CIPM Expert (Level II) Exam

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Two managers each have an information ratio of 0.50. Manager A targets a tracking error of 3%; Manager B targets 6%. Under the fundamental law of active management framework, what does an equal information ratio at different tracking-error levels primarily indicate about the two managers?

Manager B has more skill because of higher tracking error Both deliver the same active return per unit of active risk Manager A will always outperform Manager B in absolute terms The information ratios cannot be compared at different risk levels

Correct Answer:

Both deliver the same active return per unit of active risk

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