Advanced Performance Measurement
Dates:
October 1 - 2, 2008
October 1 - 2, 2008
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
Price:
EUR 1,400
EUR 1,400
Lecturer:
Søren Plesner
Søren Plesner
- Money-Weighted and Time-Weighted Return
- Measuring Risk-Adjusted Performance
- Measuring Relative Performance
- Attribution and Style Analysis
- Global Performance Reporting Standards™ – GIPS®
- Client Reporting and Performance-Related Fee Systems
The purpose of this course is to give you a good understanding of tools and methods used for measuring investment performance and of the uses of performance measurement in investment management.
We start with a quick review of various measures for computing rates of return, including money-weighted return, internal rate of return and time weighted return. We also briefly discuss practical challenges such as obtaining and validating internal as well as external data.
Further, we present and explain various measures of risk-adjusted performance. These include traditional measures such as Treynor Index and the Sharpe Ratio, and newer and more sophisticated measures. We also calculate and interpret the information ratio performance measure and other benchmark-relative measures.
Using attribution analysis, we then explain and illustrate how investment performance can be decomposed into “policy” and “active management” contributions. We also discuss the use of return-based style analysis in distinguishing between active managers and passive managers. Using multi-currency attribution analysis, we show how the currency contribution component can be calculated and interpreted.
Further, we explain how risk-adjusted performance can or should be measured for hedge fund and other investments with asymmetric risk profiles (tail risk), and we discuss how the performance of these instruments can be compared with that of more traditional investments.
We then take a closer look at the Global Investment Performance Standards (GIPS®) standards presenting investment performance in the context of portfolio management. We identify and explain the requirements of each of the five main topics of the GIPS standards: input data, calculation methodology, composite construction, disclosures, and presentation and reporting. We also discuss the reporting for sophisticated clients that have needs that go beyond GIPS.
Finally, we present various systems for calculating performance-related fees and we discuss the possible advantages and pitfalls in using such systems to align the interests of the manager with those of the investor.
We start with a quick review of various measures for computing rates of return, including money-weighted return, internal rate of return and time weighted return. We also briefly discuss practical challenges such as obtaining and validating internal as well as external data.
Further, we present and explain various measures of risk-adjusted performance. These include traditional measures such as Treynor Index and the Sharpe Ratio, and newer and more sophisticated measures. We also calculate and interpret the information ratio performance measure and other benchmark-relative measures.
Using attribution analysis, we then explain and illustrate how investment performance can be decomposed into “policy” and “active management” contributions. We also discuss the use of return-based style analysis in distinguishing between active managers and passive managers. Using multi-currency attribution analysis, we show how the currency contribution component can be calculated and interpreted.
Further, we explain how risk-adjusted performance can or should be measured for hedge fund and other investments with asymmetric risk profiles (tail risk), and we discuss how the performance of these instruments can be compared with that of more traditional investments.
We then take a closer look at the Global Investment Performance Standards (GIPS®) standards presenting investment performance in the context of portfolio management. We identify and explain the requirements of each of the five main topics of the GIPS standards: input data, calculation methodology, composite construction, disclosures, and presentation and reporting. We also discuss the reporting for sophisticated clients that have needs that go beyond GIPS.
Finally, we present various systems for calculating performance-related fees and we discuss the possible advantages and pitfalls in using such systems to align the interests of the manager with those of the investor.
Global Investment Performance Standards™ and GIPS® are registered trade marks of CFA Institute
13.00 - 16.30 Measuring Relative Performance
- Peer-Groups (“Manager Universe”)
- Types of Benchmarks
- Equity Benchmarks
- Fixed Income Benchmarks
- Composite Benchmarks
- Hedge Fund Benchmarks
- Narrow-Based Benchmarks vs. Broad Market-Based Benchmarks
- Some Problems in Using Benchmarks
- Survivor Bias
- Rebalancing and Liquidity
- Sampling Bias
- Style (Mis-) Classification
- Measures of Relative Performance
- Alpha
- Tracking Error and Information Ratio
- Risk Budget
- Small Exercises
Thursday, October 2
09.00 - 09.15 Recap
09.15 - 12.00 Attribution Analysis and Style Analysis
- Decomposing Portfolio Return
- Index Effect, Allocation Effect and Selection Effect
- Evaluating Global Portfolios
- Market Allocation Effect
- Currency Contribution
- Selection Effect
- Measuring Effectiveness of Diversification
- Analysis of Extra-Market Risk (Barra)
- Evaluation of Bond Portfolio Performance
- Policy Effect
- Rate Anticipation Effect
- Analysis Effect
- Trading Effect
- Style Analysis
- Using Return-Based Style Analysis in Judging Manager Style Consistency
- Style Benchmarks
- The Problem with “Measurement Error”
- Small Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Global Performance Presentation Standards
- Objectives and Key Characteristics of the GIPS® Standards
- Requirements and Recommendations
- Input Data
- Portfolio Valuation
- Accounting Methods
- Return Calculations
- Composites
- Presentation and Reporting
- Verification
- Case Study: Performance Presentation that Complies with the GIPS® Standards
Performance-Related Fee Systems
- Types of Fee Systems
- Absolute/Relative, Symmetric/Asymmetric
- Fee Systems with Threshold and “High Watermark” Clauses
- Small Exercise
Evaluation and Termination of the Seminar
