Investment Performance Management Program

Investment Performance Management Program

Key Topics Covered:

• Performance Returns
• Annualised vs Cumulative Returns
• Impact of Fees
• Currency impact
• Benchmarking
• Contribution Analysis
• GIPS
• Performance Attribution
• Equity Attribution – ‘Top Down’, Single Period
• Equity Attribution – ‘Bottom Up’ Alternative, Single Period
• Introduction to Multi-Currency Attribution
• Ex-Post and Ex-Ante Risk
• Statistical Concepts
• Ex-Post – Key Absolute Measures
• Ex-Post – Key Relative Measures

Key Learning Outcomes:

• Calculate returns and use key metrics
• Understand the benchmarks and indices and use them to measure performance
• Calculate and measure risk
• Track errors in performance
• Apply portfolio attribution
• Understand and apply Global Investment Performance Standards
• Present performance results and prepare reports

Who Should Attend:

This course offers high-level understanding of performance measurement, attribution & risk management for professionals who need to understand and calculate financial performance including but not limited to:

• Performance analysts, fund managers, operations staff
• Database managers
• Investment management
• Equity sales & research
• Pension funds
• Insurance
• Institutional investors and wealth advisors
• Banking

Who Should Attend:

This course offers high-level understanding of performance measurement, attribution & risk management for professionals who need to understand and calculate financial performance including but not limited to:

• Performance analysts, fund managers, operations staff
• Database managers
• Investment management
• Equity sales & research
• Pension funds
• Insurance
• Institutional investors and wealth advisors
• Banking

Program Director: Paul Giles

Paul Giles has over 25 years asset management industry business consultancy and professional training experience. This has encompassed all three of the traditional ‘Offices’ – Front, Middle and Back/Investment Accounting – so he has a unique understanding of the inter-Office dependencies and data flows.

In recent years he has focused on the Middle Office and out of this has produced a set of comprehensive ‘Teachins’ – Training Workshops which cover the business requirements of Investment Performance, Equity/Fixed Interest Attribution and Ex-Post/Ex-Ante Risk. The modules embody a unique training approach, refined through his experience of working with users, operations, development and technical staff at all levels over the years. This approach includes the use of case studies which start from ‘real, raw’ market data, practical systems’ tips and a sympathetic view of audience needs/pre-requisite experience in these potentially complex application areas.

Paul’s cross-industry consultancy and training experience has encompassed more than a dozen major hands-on implementation projects involving organisations both large and small – such as BNP Paribas Securities Services, Swiss Re, AIMCo, Riyad and NCB Banks and AXA Wealth. He has designed and rolled out, across 6 of the 7 continents, a Middle Office Product Training Programme for a Global Software House involving both physical and virtual classrooms as delivery mediums.

2 Days Program Agenda

Day 1 – Performance Returns

Objectives and Scope:

• Middle Office’ Environment
• Portfolio Valuation to Performance Report
• Evaluating Manager Performance – the Options
• Performance Attribution – Deconstructing the Value Add
• Risk – Ranking Portfolios with Equal Performance

Performance Returns:

• Simple Returns – Absolute and Percentage
• Definition, Source, Relevance of Performance Flows
• Data and Signage Implications for Flows
• Modified Dietz Methodology
• Money and Time – Weighted Returns
• Flow Weighting
• Returns Period to Date
• Sector and Portfolio – Level Returns
• Review Distance – Learning Exercise

Consolidation Case Study: Daily Security and Cash Returns

Alternative Methodologies:

• Internal Rate of Return
• Linked Internal Rate of Return
• Bank Administration Institute

Annualised vs Cumulative Returns:

• Annualised and Cumulative Reporting Options
• Annualising Cumulative Returns

Impact of Fees:

• Regulatory Requirements
• System Implications
• Storing Returns Both Gross and Net of Fees

Currency impact:

• Local, Currency and Base Returns
• Algorithms
• Deriving the Third Return

Benchmarking

• Types of Benchmark
• Relevant Benchmark
• Excess Return
• Arithmetic vs Geometric Comparison
• Drifting
• Price, Market Capitalisation and Equal Weighted Calculations

Case Study: Benchmark Creation from Indices

Contribution Analysis

• Contribution as Position Weight * Position Return
• Reconciliation – Total Contributions to Portfolio Return
• Multi-Period Implications

GIPS

• Overview of Global Investment Performance Standards
• Self-Regulatory with Independent Verification
• 2020 Exposure Draft
• Compliance – ‘Musts’ and ‘Recommendations’

Day 1 Review, Questions and Close
Open Forum

 

Day 2 – Performance Attribution and Risk

Performance Attribution:

• Review of Day 1
• Review of Performance Reporting

Attribution:

• Concepts
• Equity Attribution
• Fixed Interest Attribution
• Workshop Focus on Equity Attribution

Equity Attribution – ‘Top Down’, Single Period:

• Deconstructing the Value Add
• Brinson Additive Benchmark-Relative Methodology
• Attribution Elements – ‘Top Down’ Approach
• Single Currency Approach
• Total of Elements Reconciliation to Excess Return
• Geometric Alternative
• ‘What if?’ Analysis of Attribution Elements

Case Study Equity Attribution – Top Down

Equity Attribution – ‘Bottom Up’ Alternative, Single Period:

• Attribution Elements – ‘Bottom Up’ Approach
• Extend Case Study Equity Attribution to Bottom Up Approach
• Multi-Period Attribution
• Bottom-Up Approach
• Arithmetic vs Geometric Approach gives Variances
• Attribution ‘Smoothing’ Removes Variances
• Smoothing Algorithms

Case Study Attribution Smoothing: Frongello Algorithms

Introduction to Multi-Currency Attribution 

• Currency Attribution Element
• Introduction to‘Naiive’ Currency Attribution
• ‘Full’ Multi-Currency Attribution Options
• Karnosky and Singer Methodology

Other:

• Transactions Based vs Holdings Based Attribution
• Source of Residuals
• Smoothing for Residuals

Risk:

• Concepts
• Ex-Post Risk
• Ex-Ante Risk
• Workshop Focus on Ex-Post Risk

Statistical Concepts

• Standard Deviation
• Correlation
• The Capital Assets Pricing Model
• Case Study Part 1 – Standard Deviation

Ex-Post – Key Absolute Measures 

• Sharpe Ratio
• Treynor Measure
• Jensen’s Alpha
• Drawdown
• Case Study Part 2 – Absolute Measures

Ex-Post – Key Relative Measures:

• Tracking Error
• Information Ratio
• Case Study Part 3 – Relative Measures

Questions and Close

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