This 3-day course is designed to give a thorough understanding of key techniques used in performance measurement, ranging from basic return calculation, risk-adjusted performance measurement and achieving GIPS® compliance to advanced multi-currency, multi-period attribution techniques.

Through class lectures, interactive discussion, practical exercises and team presentations, you will:

• Understand the concepts of performance measurement
• Learn the different ways to derive returns (and why the results can vary)
• Comprehend how cashflows affect the returns
• Analyse the principles of benchmarking
• Ascertain why risk measurement and management are important and what the measures mean
• Discern the role of attribution, the challenges in getting it right, and how it should be used
• Understand the differences and difficulties of fixed income attribution
• Learn the status and application of the different international performance measurement standards
  

Course background

Portfolio performance measurement is the quality control element of the investment decision process. It provides the necessary information to enable asset managers and clients to assess exactly how their money has been invested and the results of the process. Performance measurement is a core part of the decision process - not external to it - providing essential information to several key stakeholders.

Performance return attribution is defined as quantifying the excess returns of the active decisions of the investment management process. In recent years the developments in performance measurement, standards, risk and attribution (particularly Fixed Income Attribution) have accelerated considerably . This course is designed to bring all analysts, investors, risk managers and other stakeholders up to date with current developments.

Who should attend this course

Pension fund trustees, portfolio managers, senior management, performance measurers, risk controllers, compliance staff, sales and marketing staff and operations staff, all wanting a good understanding of performance measurement, risk and attribution.

By the end of the course participants will be able to:

• Calculate performance returns
• Know the difference between money and time-weighted returns
• Understand the impact of large cashflows on performance returns
• Calculate customised benchmarks
• Know the attributes of a good benchmark
• Understand the basics of performance attribution
• Interpret an attribution report
• Calculate basic risk-adjusted returns
• Identify risk types in asset management
• Use risk measures to evaluate portfolios
• Understand the benefits of GIPS® (Global Investment Performance Standards)
• Understand the benefits and purpose of verification

Day 1

Introduction

• What is performance measurement?
• The performance measurement process
• Basic calculations
• Currency effect
• Time weighted or money weighted?
• Practical exercise: Return calculations for an Emerging Markets portfolio

Benchmarks

• Attributes of good benchmarks
• Peer Groups, Indexes or Random Portfolios?
• Index calculations
• Practical exercise: Customised benchmark calculations
• Excess Returns - Geometric or arithmetic?
• Performance Fees

Basic Attribution

• Attribution as a management tool
• The Brinson Model
• Geometric Attribution
• Practical exercise: Be a portfolio manager for a year attribution exercise
  

Day 2

Performance Standards

• Background
• Detail
• Why do it?
• Verification
• Future Governance

Measuring Portfolio Risk

• Risk types in asset management
• Risk Control
• Ex-post, Ex-ante Risk
• Absolute, relative and regression risk measures
• Sharpe ratio
• Information Ratio
• M2
• Regression Statistics
• Jensen’s alpha
• Beta
• Covariance
• Correlation
• R2
• Fama decomposition
• GH1 & GH2
• Practical exercise: Portfolio Evaluation

Risk-Adjusted Performance Measurement for Hedge Funds

• Skewness & Kurtosis
• Bera- Jacque Test
• Downside risk
• Sortino ratio
• Upside Potential ratio
• VaR
• Omega
• Practical exercise: Detailed risk calculations from raw data
• Adjusted Sharpe Ratio
• Modified Sharpe Ratio
• Prospect Ratio
• Drawdown
• Sterling ratio
• Calmar ratio
• Burke ratio
• Sterling-Calmar ratio
• Pain index
• Ulcer index
• Pain ratio
• Marin ratio
• Practical exercise: Risk-adjusted performance measurement for Hedge Funds
• Omega Excess Return
• Hurst Index
• Effective Risk Control actions
• Risk infrastructure
  

Day 3

Further Attribution

• Multi-currency attribution
• Ankrim and Hensel
• Karnosky & Singer
• Bacon
• Practical exercise: Multi-currency geometric attribution exercise
• Attribution issues
• The evolution of attribution methodologies
• Security level attribution
• Multi-level Attribution
• Smoothing algorithms
• Carino
• Menchero
• GRAP
• Frongello
• Practical exercise: Team discussion which is the best method using previous exercise data

Fixed Income Attribution

• Campesi Framework
• Weighted Duration (Van Breukelen) Attribution
• Yield curve decomposition
• Practical exercise: Weighted Duration attribution

Derivatives

• Forwards
• Futures
• Swaps
• Options

Alternative Attribution

• Market Neutral
• 130/30 Funds
• Leverage
• Futures

Course Includes

Accompanying free book: Practical Portfolio Performance Measurement & Attribution, Carl Bacon, John Wiley & Sons Ltd

 

• The Course Director joined StatPro Group plc as Chairman in April 2000. StatPro provides sophisticated data and software solutions to the asset management industry. He also runs his own consultancy business providing advice to asset managers on risk and performance measurement.

  Prior to that, he was Director of Risk Control and Performance at Foreign & Colonial Management Ltd, Vice President Head of Performance (Europe) for JP Morgan Investment Management Inc., and Head of Performance for Royal Insurance Asset Management.

  A founder member of both the Investment Performance Council and GIPS®, he is ex-Chair of the GIPS Executive Committee, ex-Chair of both the Verification and Interpretation sub-Committees. He is a member of the UK Investment Performance Committee and a member of the Advisory Board of the Journal of Performance Measurement. He is also the founder of “The Freedom Index Company”.

  He is also the author of “Practical Portfolio Performance Measurement & Attribution” (Wiley), “Practical Risk-Adjusted Performance Measurement” (Wiley), numerous articles and papers and editor of “Advanced Portfolio Attribution Analysis”. He holds a B.Sc. Hons. in Mathematics from Manchester University.

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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