Practical Portfolio Performance Measurement and Attribution, 3rd Edition

Practical Portfolio Performance Measurement and Attribution, 3rd Edition

by Carl R. Bacon
Released January 2023
Publisher(s): Wiley
ISBN: 9781119831945

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Book description

A practitioner's guide to the role and implications of performance measurement and attribution analysis in asset management firms

Practical 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®)
  • 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.

Table of contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Acknowledgements
  6. 1 Introduction
    1. WHY MEASURE PORTFOLIO PERFORMANCE?
    2. THE PERFORMANCE MEASUREMENT PROCESS
    3. THE PURPOSE OF THIS BOOK
    4. THE ROLE OF PERFORMANCE ANALYSTS
    5. BOOK STRUCTURE
    6. NOTES
  7. 2 The Asset Management Industry
    1. ASSET CLASSES
    2. PUBLIC EQUITIES
    3. BONDS (OR FIXED INCOME)
    4. PRIVATE ASSETS
    5. COMMODITIES
    6. DERIVATIVES
    7. CURRENCY
    8. HEDGE FUNDS
    9. ASSET ALLOCATION
    10. NOTES
  8. 3 The Mathematics of Portfolio Return
    1. SIMPLE RETURN
    2. CONTINUOUSLY COMPOUNDED (OR LOGARITHMIC) RETURNS
    3. MONEY‐WEIGHTED RETURNS (MWR)
    4. TIME‐WEIGHTED RETURNS (TWR)
    5. TIME‐WEIGHTED VERSUS MONEY‐WEIGHTED RATES OF RETURN
    6. APPROXIMATIONS TO THE TIME‐WEIGHTED RETURN
    7. HYBRID METHODOLOGIES
    8. WHICH METHOD TO USE?
    9. SELF‐SELECTION
    10. ANNUALISED RETURNS
    11. GROSS‐ AND NET‐OF‐FEE CALCULATIONS
    12. OVERLAY STRATEGIES
    13. BASE CURRENCY AND LOCAL RETURNS
    14. HEDGED RETURNS
    15. PORTFOLIO COMPONENT RETURNS
    16. CONTRIBUTION TO RETURN
    17. COMPOSITE RETURNS
    18. NOTES
  9. 4 Benchmarks
    1. BENCHMARKS
    2. THE ROLE OF BENCHMARKS
    3. TYPES OF BENCHMARKS
    4. COMMERCIAL INDEXES
    5. CUSTOMISED INDEXES
    6. PEER GROUPS AND UNIVERSES
    7. RANDOM PORTFOLIOS
    8. EXCHANGE‐TRADED FUNDS (ETF)
    9. TARGET RETURNS
    10. BLENDED BENCHMARKS (OR BALANCED BENCHMARKS)
    11. SPLICED INDEXES
    12. MONEY‐WEIGHTED BENCHMARKS (OR PUBLIC MARKET EQUIVALENTS)
    13. NORMAL PORTFOLIO
    14. BENCHMARK STATISTICS
    15. EXCESS RETURN
    16. NOTES
  10. 5 Risk
    1. DEFINITION OF RISK
    2. DESCRIPTIVE STATISTICS
    3. PERFORMANCE APPRAISAL
    4. RELATIVE RISK
    5. REGRESSION ANALYSIS
    6. FACTOR MODELS
    7. DRAWDOWN
    8. PARTIAL MOMENTS
    9. FIXED INCOME RISK
    10. MISCELLANEOUS RISK MEASURES
    11. RISK‐ADJUSTED RETURN
    12. TYPES OF EXCESS RETURN (OR ALPHA)
    13. A PERIODIC TABLE OF RISK MEASURES
    14. NOTES
  11. 6 Return Attribution
    1. WHAT IS ATTRIBUTION?
    2. TYPES OF RETURN ATTRIBUTION
    3. ARITHMETIC ATTRIBUTION
    4. BRINSON AND FACHLER
    5. INTERACTION
    6. GEOMETRIC EXCESS RETURN ATTRIBUTION
    7. SECTOR WEIGHTS
    8. FREQUENCY OF ANALYSIS
    9. ATTRIBUTION INCLUDING DERIVATIVES
    10. MULTI‐CURRENCY ATTRIBUTION
    11. GEOMETRIC MULTI‐CURRENCY ATTRIBUTION
    12. INTEREST RATE DIFFERENTIALS
    13. FIXED INCOME ATTRIBUTION
    14. MULTI‐PERIOD ATTRIBUTION
    15. SMOOTHING ALGORITHMS
    16. LINKING ALGORITHMS
    17. CONTRIBUTION ANALYSIS (OR ABSOLUTE RETURN ATTRIBUTION)
    18. RISK‐ADJUSTED ATTRIBUTION
    19. MULTI‐LEVEL ATTRIBUTION
    20. ABOR, IBOR OR PBOR
    21. EVOLUTION OF PERFORMANCE ATTRIBUTION METHODOLOGIES
    22. NOTES
  12. 7 Performance Presentation Standards
    1. WHY DO WE NEED PERFORMANCE PRESENTATION STANDARDS?
    2. GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS®) – A HISTORY
    3. ADVANTAGES FOR ASSET MANAGERS
    4. THE GIPS STANDARDS
    5. FUNDAMENTALS OF COMPLIANCE
    6. INPUT DATA AND CALCULATION METHODOLOGY
    7. COMPOSITE AND POOLED FUND MAINTENANCE
    8. PRESENTATION AND REPORTING
    9. DISCLOSURES
    10. SAMPLE GIPS COMPOSITE REPORT
    11. GIPS ADVERTISING GUIDELINES
    12. VERIFICATION
    13. ACHIEVING COMPLIANCE
    14. MAINTAINING COMPLIANCE
    15. GIPS STANDARDS FOR ASSET OWNERS
    16. NOTES
  13. 8 Bringing It All Together
    1. EFFECTIVE DASHBOARDS
    2. DATA VISUALISATION TOOLS
    3. MANAGER SELECTION
    4. THE FOUR DIMENSIONS OF PERFORMANCE
    5. RISK CONTROL STRUCTURE
    6. RISK MANAGEMENT
    7. NOTES
  14. Glossary of Key Terms
  15. Appendix A: Simple Attribution
    1. A.1 ATTRIBUTION METHODOLOGY
    2. A.2 STOCK SELECTION
    3. A.3 ASSET ALLOCATION
    4. A.4 SUMMARY
  16. Appendix B: Multi‐Currency Attribution Methodology
    1. B.1 SCENARIO
    2. B.2 STOCK SELECTION
    3. B.3 ASSET ALLOCATION
    4. B.4 CURRENCY EFFECTS
    5. B.5 SUMMARY
  17. Bibliography
  18. About the Author
  19. Index
  20. End User License Agreement

Product information

  • Title: Practical Portfolio Performance Measurement and Attribution, 3rd Edition
  • Author(s): Carl R. Bacon
  • Release date: January 2023
  • Publisher(s): Wiley
  • ISBN: 9781119831945