Bill Smith is evaluating the performance of four large-cap equity portfolios: funds A, B, C and D. As part of his analysis, Smith computed the Sharp ratio and the Treynor measure for all four funds. Based on his finding, the ranks assigned to the four funds are as follows:

Fund Treynor Measure Sharpe Ratio

A 1 4

B 2 3

C 3 2

D 4 1

The difference in rankings of funds A and D based on the Sharp ratio and the Treynor measure is most likely due to:

Different benchmarks used to evaluate each fund’s performance.

A lack of diversification in fund D as compared to fund A.

A lack of diversification in fund A as compared to fund D.

A difference in risk premiums.

A difference in systematic risk