Investing in t-bills versus a private equity fund

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Sarah manages a private equity fund that has an expected risk premium of 5% and an expected standard deviation of 10%. The current stated rate on T-Bills is 3%. A client Sarah has been working with for some time to win over and invest has decided to place an initial investment in the fund. She, however, is also placing part of her investment in a T-Bill money market fund. She places $100,000 in Sarah's fund and $50,000 in the T-Bill fund.

Which of the 2 investment options will carry the better sharp value, or in essence, is a better investment over time for Sarah's client's portfolio? Why?

Reference no: EM1338195

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