In my last post, I covered a “fast” way to solve multiple choice internal rate of return exercises. In today’s post, I look at a second quick method. Recall the details from the last post: Account market value on 3/31 is $56.3 million Account market value on 4/11 is $58.2 million (prior to contribution on […]
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For today’s post, I’d like to review some of the “Dietz-style” formulae we use to calculate true time-weighted return and estimated time-weighted return. I’ve never actually seen the formulae presented this way, but hopefully doing it in this fashion will help candidate see that we are using essentially the same basic formula in all of […]
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Last year John Stossel wrote a piece titled “Almost Everything We’re Taught Is Wrong.” When it comes to performance measurement, there’s some truth to this, too. Sorrowfully, many refuse to be open to the possibility that the way they’ve been doing or promoting something is fundamentally wrong. Is it pride, a refusal to be objective, […]
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An Expert Level candidate asked some questions related to sample exam Item Set #15; the vignette is described below: White Oaks Investment Management, a firm that claims to comply with the GIPS standards, manages an equity portfolio for the City of Kent’s pension plan. Patrick Lor, head of performance reporting, is reviewing Kent’s fourth-quarter portfolio […]
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A GIPS(R) (Global Investment Performance Standards) verification client sent me a note recently, stating that they had historically used Modified Dietz for their returns, but will be switching to “true daily.” He asked if this was permitted or if they would have to restate their history. This also raises the question about multiple methods being […]
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There seems to be some confusion as to what “time-weighting” actually means. The term was coined in the 1968 Bank Administration Institute (BAI) standards. The BAI proposed three ways to calculate returns: the “exact method,” whereby we revalue the portfolio for any cash flow the “linked IRR,” where we geometrically link subperiod (e.g., monthly) returns […]
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Many firms like to group a client’s accounts together, to provide a consolidated report that presents the client with the “overall picture” of what they hold. This is commonly done in the brokerage arena, as well as by others. So, how does one calculate performance for such an arrangement? Well, what question are you trying […]
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