Mr. Ramesh, a 40-year-old investor, has invested - 10,00,000 in an actively managed Equity Mutual Fund. The fund has an Expense Ratio of 2.50% and…

Mr. Ramesh, a 40-year-old investor, has invested - 10,00,000 in an actively managed Equity Mutual Fund. The fund has an Expense Ratio of 2.50% and follows the Nifty 50 Index as its benchmark. Upon analyzing the Fund details, he comes across the concept of Tracking Error (TE) and finds out that the same Fund has a Tracking Error (TE) of 3.20%. A few months later, Mr. Ramesh receives a notification that the Fund has implemented Side Pocketing. The Fund has an exposure of 15% of his investment in a debt instrument of XYZ Ltd, a company facing a severe financial crisis. Since XYZ Ltd has defaulted on its payments, the Fund Manager has moved this portion into a side pocket. Following the decision of Fund Manager, Mr. Ramesh decides to reconsider any of the following option: Should he stay invested in this Fund and wait for the Side-Pocketed assets to recover?Should he switch to a Passive Index Fund that has a lower Tracking Error and lower Expense RatioShould he redeem his remaining liquid holdings and invest in a better-performing actively Managed Fund? Based on the above scenario and given his current situation, choose the most appropriate answer for the following multiple-choice questions: