Read more
A practitioner's guide to the role and implications of performance measurement and attribution analysis in asset management firmsPractical Portfolio Performance Measurement and Attribution is a comprehensive reference and guide to the use and calculation of performance returns in the investment decision process. Focusing on real-world application rather than academic theory, this highly practical book helps asset managers and investors determine return on assets, analyse portfolio behaviour and improve performance. Author Carl R. Bacon clearly describes each of the methodologies used by performance analysts in today's financial environment whilst sharing valuable insights drawn from his experience as a Director of Performance Measurement & Risk Control.The third edition is revised to reflect recent developments in performance attribution and presentation standards. Fully up-to-date chapters cover the entire performance measurement process, including return calculations, attribution methodologies, risk measures, manager selection and presentation of performance information. Written by an acknowledged leader in global investment performance standards, performance attribution technique and risk measurement Aligns with the publication of the 2020 Global Investment Performance Standards (GIPS (R)) Explains the mathematical aspects of performance measurement and attribution in a clear, easy-to-understand manner Provides numerous practical and worked examples of attribution analysis and risk calculations supported by Excel spreadsheets Includes signposts for the future development of performance measurement Practical Portfolio Performance Measurement and Attribution, Third Edition, remains a must-have for performance analysts and risk controllers, portfolio managers, compliance professionals and all asset managers, owners, consultants and servicing firms.
List of contents
Contents
Acknowledgements
Contents
Chapter 1 Introduction
The Performance Measurement Process
Role of performance analysts
Book Structure
Chapter 2 The Asset Management Industry
Asset Classes
Public Equities
Bonds (or Fixed Income)
Cash (and near cash)
Private Assets
Real Estate
Private Equity
Private Debt
Infrastructure
Natural Resources
Commodities
Derivatives
Futures
Forwards
Swaps
Contracts for Difference (CFD)
Options
Overlay Strategies
Currency
Hedge Funds
Asset Allocation
Strategic asset allocation
Tactical asset allocation.
Chapter 3 The Mathematics of Portfolio Return
Simple Return
Continuously Compounded (or logarithmic) Returns
Money-weighted Returns (MWR)
Internal Rate of Return (IRR)
Ex-ante Internal Rate of Return
Simple Internal Rate of Return
Ex-post Internal Rate of Return
Simple Dietz
ICAA Method
Modified Dietz
Time-Weighted Returns (TWR)
True Time-Weighted
Unit Price Method
Unit Price Method with Distributions
Time-weighted versus Money-weighted Rates of Return
Approximations to the Time Weighted Return
Index Substitution
Regression Method (or b method)
Analyst's Test
Hybrid Methodologies
Linked Modified Dietz
BAI Method (or linked IRR)
Which method to use?
Late Trading and Market Timing
Self-selection
Large Cash Flow
Self-selection of methodologies
Annualised Returns
Since Inception Internal Rate of Return (SI-IRR)
Modified IRR (MIRR)
Return Hiatus
Gross and net of fee calculations
Estimating gross and net of fee returns
Initial Fees
Performance Fees
Asymmetric or Symmetric
Crystallisation
Performance Fees in Practice
Equalization
Reporting Hierarchy
Overlay Strategies
Overlay performance return calculations:
Base currency and local returns
Currency conversions
Hedged Returns
Currency Overlay Returns
Perfectly Hedged Returns
Portfolio Component Returns
Money-weighted Component Returns
End of day
Beginning of day
Intra-day weighted
Differentiated
Actual Time
Rule-based
Extremely large cash flows
Which timing assumption to use for time-weighted returns?
Carve Outs
Sub-portfolios
Cash Sectors
Individual security returns
Multi-period component returns
Abnormal Returns
Short Positions
Contribution to return
Composite returns
Chapter 4 Benchmarks
Benchmarks
Benchmark attributes
The Role of Benchmarks
Types of Benchmarks
Commercial Indexes
Calculation methodologies
Aggregate Price Index (Price-weighted Index or Carli type)
Geometric (or Jevons type) Index
Market Capitalisation Index
Laspeyres Index
Paasche Index
Marshall - Edgeworth Index
Fisher Index
Equal weighted Indexes
