The investment portfolio's performance is reviewed on a monthly basis and evaluation reports are issued on a quarterly basis. In addition, we also review the selected managers to ensure that they remain in compliance with the agreed investment guidelines. We compare the manager structure to policy guidelines, and results with objectives
Our Investment Performance Analysis Reports contain rates of return and risk analyses, universe ranks for each strategy, and for each investment manager. We clearly isolate the sources of over- and under-performance and the risk levels inherent in each sub-strategy in the total portfolio.
Assessing Current Portfolio
Our proprietary reporting capability allows us to monitor total portfolios, as well as each manager's investment performance and to customize analyses to our client's specific requirements. We evaluate each manager against the most appropriate benchmark and style universe and measure returns on a risk-adjusted basis. We analyze such factors utilizing quantitative measurement tools such as tracking error, standard deviation, alpha, information ratio, beta, Treynor ratio and Sharpe ratio. We also provide qualitative analysis and performance attribution reports that help determine the sources of return for each portfolio.
As a result, clients receive a customized quarterly report that allows them to focus on the most salient issues:
Absolute Performance Review: Clients typically receive a report that evaluates a portfolio's overall performance compared to other similar portfolios. In addition, other factors such as allocations to equity and fixed income are also noted.
Relative Performance Review: Our performance analysis focuses on both relative and risk-adjusted returns in relation to an appropriate benchmark. It evenly compares performance to a universe of similarly managed portfolios using various types of attribution analysis e.g. at the total fund/asset class and manager levels.
Qualitative Analysis Review: Managers are monitored on an ongoing basis: a process that entails a quarterly analysis of performance and portfolio characteristics, personal meetings at least annually, and numerous conference calls throughout the year. The goal of this monitoring process is to assess organizational stability, consistency of the investment process, turnover of key personnel, growth in assets under management, and other factors that may affect the performance.
Our analysts are able to use both qualitative and quantitative methods to compare our clients' portfolio returns and characteristics to similar sized portfolios.
Our performance measurement includes:
- Performance reviews, including immediate monthly "flash" reports
- Comparisons to guidelines and long-term objectives
- Evaluation of investment managers
- Performance attribution and style analysis
- Breakdown of portfolio changes and their impacts
Thorough performance measurement enables our clients to:
- Receive computed investment results and risk assessments
- Know how their portfolios have performed compared to passive benchmarks and to other similarly managed portfolios
- Make informed decisions about investment policy, asset allocation, and investment managers selection
- Compare their asset allocation to its strategic targets allowing more timely rebalancing decisions
- Satisfy requirements for monitoring investment managers
Our goals for performance measurement are to:
- Provide clear, easy to read quarterly performance reports
- Provide customized reports by presenting information at a level of detail most useful to the client
- Highlight portfolio strengths and weaknesses
- Recommend portfolio changes when needed
Portfolio Monitoring Process
Evaluating investment performances is an important fiduciary responsibility. Investors make sound decisions about managers and allocations when they have a full understanding of how the selections and weightings of individual managers collectively tilt a portfolio toward particular investment styles and biases. We monitor client portfolios using both asset-based and returns-based style analyses
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Perfor- mance Analysis
Perfor- mance Reporting
Portfolio Rebalancing Simulation
New Investment decision
Our performance analysis compares portfolio results to investment expectations, to appropriate benchmarks and relatively to their peers. All reports include a market environment analysis. In addition, our proprietary systems allow customized reports that meet the specific needs of each client.
This information provides valuable insight over long periods of time and is useful in evaluating an investment manager's consistency of process over time in the aim of determining and understanding the manager's sources of excess return (alpha).
Monthly Investment Performance Summary: at the request of the client, we are able to provide flash reports of asset allocation and performance which are generally available within eight business days following the end of each month.
Quarterly Investment Performance Reports: we deliver quarterly reports that describe and analyze the performance of the client's investments and total asset pool, that clearly demonstrate where success is being achieved and performance can be enhanced. These reports aggregate managers' data into a single report, and supply analytical depth not found in monthly performance reports. It places managers' and total-portfolio returns in the context of the investor's global investment plan, and provides an independent appraisal of realized performance, including absolute and relative performance with both short-term and long-term results clearly interpreted.
Portfolio Rebalancing Simulation
The rebalancing decision is a classic trade-off between producing investment results that are in line with the policy benchmark (tracking error) and the costs associated with doing so. We identify the optimal rebalancing policy on an individual client basis and also provide estimates for average rebalancing costs and expected rebalancing frequency over the long term.
Manager Structure Analysis
We conduct a manager structure analysis to determine the best number and types of managers.
This analysis helps to better understand the current manager structure and to identify areas of potential improvement in terms of the investment's risk/reward characteristics, investment options and diversification.
This review includes an analysis of the benefits that might be gained by adding or withdrawing additional funds.
Conducting a manager structure analysis prior to commencing a search for additional managers helps assure that the investments stay consistent with the objectives and appropriate for the given investment program.