Which formula represents the impact of active investment decisions made by a manager?

The formula that accurately captures the impact of active investment decisions made by a manager is identified as Impact = Weighting * Return. This formula is significant in performance evaluation as it quantifies the contribution of each investment relative to the capital allocated to it.

The rationale behind this formula is rooted in the concept of active management, where investment managers make strategic decisions to deviate from a benchmark to enhance returns. By assessing the impact as a product of weighting and return, one can determine how much each investment adds (or detracts) from the overall portfolio performance based on both the amount invested (weighting) and the performance of the investment itself (return).

In contrast, formulas dealing with return minus benchmark return focus more on relative performance but do not isolate the specific effect of individual active choices, and formulas involving market value do not directly reflect the decision-making aspect of active management. Thus, this specific formulation effectively highlights the direct relationship between the invested amount and the returns accrued, which is crucial for understanding the impact of active investment decisions.