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What are the limits to arbitrage for an active fund manager   I. Margin call II.  Performance-related concerns...

What are the limits to arbitrage for an active fund manager   I. Margin call II.  Performance-related concerns of a fund, which make even sophisticated investors not trade in the right way I only Neither I nor II II only Both I and II

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The correct Option is Both I and II.

Botth of them are limitations fo an active fund manager

Margin Call - When  fundamentally pursuing an arbitrage trade the noise traders may drive prices farther from fundamental value which makes the arbitrageur to invest additional capital which can  push the bond spreads wider and will trigger the margin call which can make the firm bankrupt.

Performance-related concerns of a fund, which is due to periodic underperformance whichh drives investors away from the following a particular sttrategy due to which managers will avoid it due to career risk.

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