Topics – Investment Performance

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Investment Performance and Risk Statistics

The recent market volatility probably has you wondering how your strategy has fared through this unprecedented time. Disruptive market environments tend to reveal critical information about active managers that help investors see those that truly add value, and those that don’t. So, what should you do to evaluate your actively-managed ...
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What is the Sharpe Ratio?

The Sharpe Ratio is calculated as the strategy's mean return minus the mean risk-free rate divided by the standard deviation of the strategy. The Sharpe Ratio measures the excess return for taking on additional risk.The Sharpe Ratio is one of the most popular performance appraisals measures and is used to ...
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Investment Performance Outlier Testing

For any firm that aggregates portfolios of the same strategy into a composite, or otherwise groups portfolios by mandate, how do you know that each portfolio truly follows that strategy? The answer is outlier testing. Why Utilize Composites? The GIPS standards require firms managing separate accounts to construct composites, which ...
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Arithmetic vs Geometric Mean: Which to use in Performance Appraisal

Most performance appraisal measures utilize a mean return in its calculation. This can be in the form a geometric mean or a simple arithmetic average. Because both types of means can be used, it raises the question: Which measure should be applied?When calculating performance, we are accustomed to calculating returns ...
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How to Construct Composites

GIPS compliant firms are required to calculate and present composite performance, rather than presenting the performance of a model or single representative account. The purpose of this is to ensure investment managers are presenting an accurate representation of their ability to implement a strategy, rather than “cherry-picking” their best performing ...
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Policies and Procedures

Part 1: Creating GIPS Policies and Procedures

Firm Definition and Definition of Discretion GIPS compliant firms are required to document how they comply with the GIPS requirements as well as any recommendations that the firm chooses to follow. This document acts as the firm’s internal representation of their GIPS compliance, and is intended to state the firm’s ...
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How to Become GIPS Compliant

How to Become GIPS Compliant

Many firms are interested in becoming GIPS compliant, but are intimidated by the initial process of bringing their firm into compliance. As long as you know the steps to become GIPS compliant and understand the options you have to complete each step, this process is very manageable. The information provided ...
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What are the GIPS Standards?

The Global Investment Performance Standards (GIPS®) are an ethical framework that standardize how investment managers calculate and report their investment performance to prospective investors. Standardized presentations help ensure the information presented is meaningful, complete, and comparable to performance presentations of other GIPS compliant firms, regardless of location or regulatory jurisdiction. This comparability ...
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Are fee-related admin issues causing errors in your investment performance?

Calculating gross and net investment performance should be simple, right? Yes, however, firms often face fee-related portfolio accounting or administrative issues that cause complications, resulting in inaccurate performance. It is essential that all types of fees are accounted for correctly to ensure reported performance can be relied upon and properly ...
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