The investor’s active return is calculated as a weighted average return:
To calculate the portfolio active risk, we assume that the correlations between the managers’ active returns are zero and use the active risks and allocations:
The investor’s information ratio is then 1.95% / 1.66% = 1.17 if you have rounded the active risk and return to two digits. If you have carried the answers for the active return and risk in your calculator’s memory, the answer is 1.18.
