What investment management style does a unit-linked fund adopt if it aims to match the return of similar competing funds?

• A. Active
• B. Dynamic
• C. Neutral
• D. Consensus

Answer: (D)

The investment management style that a unit-linked fund adopts to match the return of similar competing funds is known as a consensus approach. This style focuses on achieving performance that is in line with prevailing market expectations by aligning strategies with those that are commonly used by other funds in the same category. The consensus style often involves careful analysis of market trends and competitor performance, allowing for adjustments to be made in a way that aims to remain comparable to peers.

In this context, the idea is not necessarily to outperform but to provide similar returns through a balanced approach that may incorporate various strategies that are prevalent in the market. This can often lead to stable performance that attracts investors looking for reliability rather than aggressive growth.

Other investment management styles such as active, dynamic, and neutral are focused on different objectives. Active management typically involves taking a more aggressive approach to outperform benchmarks or competitors through specific stock selection and timing strategies. Dynamic management implies a more fluid approach that adjusts an investment strategy based on market conditions. A neutral stance generally suggests a more cautious or balanced perspective but does not precisely aim for matching returns with specific competitive funds.