The New Fund had average daily assets of 30 billion in the p

The New Fund had average daily assets of $3.0 billion in the past year. The fund sold $408 million and purchased $508 million worth of stock during the year. What was its turnover ratio? (Round your answer to 2 decimal places.)

Turnover ratio             %

Solution

Turnover Ratio represents the churn of the fund portfolio or the percentage of portfolio holdings that have changed over a time period.

The New fund sold $408 mil worth of share and purchased $508 mil worth of shares.

Now, the purchased shares value was higher by about $100 mil. This implies $408 mil worth of stock was replaced and $100 mil was fresh inflow.

Turnover Ratio = $408 mil/$3000 mil = 0.136

Hence, turnover ratio = 13.6%