Question

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

Answer 1

The correct answer is 1 only

Marginal call is a limit to an active manger. It is the term used to describe the alert send to a trader no know him that the capital in his account has fallen below the minimum amount needed. It is a broker’s demand that an investor deposit additional money or securities for the account to brought to the minimum value. This is known as maintenance margin. So, an investor wants to keep above the margin. So that we can say that the marginal call is a limit to an active manager