Evaluating an Investment Manager's Rationale
An investment fund manager based in Japan exclusively invests in high-yield emerging market bonds, boasting an average return of 8%. In their performance reports, they completely disregard the Japanese government bond yield (currently at 0.5%), arguing it's 'irrelevant' for their high-risk, high-return strategy. Evaluate the fund manager's argument. Is the home country's risk-free asset truly irrelevant in this context? Justify your position.
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Evaluating an Investment Manager's Rationale