Performance Measurement and Attribution Analysis

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Performance Measurement and the Investment Process

• Investment Management as a Three-Step Process
• The Importance of Performance Evaluation to Fund Sponsors and Investment manager

Measuring Return and One-Dimensional Performance

• Measuring IRR and End-to-End Returns
• Money-Weighted and Time-Weighted Return
• Data Requirements – and the Problems in Collecting Data

Measuring Risk-adjusted Performance

• The Importance of Risk Adjustment
• Measures of Risk
  • Variance, standard deviation, covariance and correlation
  • Value-at-Risk and downside risk
• Measures of Risk-Adjusted Performance
  • Jensen’ s Alpha and the Treynor Index
  • Sharpe Ratio
  • Sortino Ratio and ROMAD
• Small Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Measuring Relative Performance

• Peer-Groups (“Manager Universe”)
• Types of Benchmarks
  • Equity and 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

Day Two

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

Evaluation and Termination of the Seminar