PERFORMANCE MEASUREMENT FOR ASSET OWNERS AND CONSULTANTS

Asset Owners and investment consultants hold critical roles in the world of investing.  And while their needs for performance measurement overlap quite a bit with what an investment manager needs, there are some unique characteristics that warrant them having their own class, devoted to provide the education they need to best understand this important field.  Our one-day class borrows from our Fundamentals, but with a twist: it’s taught for the perspective of this audience.  There are no prerequisites for this class.

Students receive a binder with all of the PowerPoint slides and a copy of the GIPS standards.

COURSE OBJECTIVES:

Rates of Return
•    Gain an understanding of the different approaches (exact vs. approximate; time vs. money-weighted)
•    Discover why plan sponsors should see performance reported from multiple perspectives

Benchmarks
•    Understand the basic approaches, and why plan sponsors need to be sensitive to reporting that is sensitive to their unique requirements

Risk Measurement
•    Learn the major approaches to risk and risk-adjusted performance
•    Discover why plan sponsors need an additional approach that takes their decisions into consideration

Attribution
•    Develop an understanding of the basic approaches
•    Discover why plan sponsors need an additional approach that takes their decisions into consideration

GIPS
•    Develop a fundamental understanding of its concepts and appreciation for its role
•    Discover why claiming compliance and being compliant can be two different things, and what verification really does
•    Learn of the expanded role of the Standards into the plan sponsor’s arena

AGENDA:

RATES OF RETURN
•    Why percentages are used
•    The role of returns to judge performance
•    The role of cash flows
•    Time-weighted returns: why and how it’s done
•    Money-weighted returns: their role in reporting and why they have more value than time-weighting for plan sponsors
•    When the numbers don’t make sense (and why they do!)
•    Where the numbers come from (external managers, in-house systems, custodians, consultants), and what to do with them

BENCHMARKS
•    A review of the four major classifications of benchmarks: market indices, absolute, peer groups, and custom
•    The criteria that is often used to judge benchmarks
•    What benchmarks should a plan sponsor use?

RISK MEASUREMENT
•    Risk measures versus risk-adjusted measures
•    A review of the major measures and what they offer/how they compare
•    Risk management:  how best to manage risk when you don’t control the investment

ATTRIBUTION
•    Absolute versus relative attribution
•    The Brinson models: how they differ
•    The interaction effect: why it’s loved, why it’s hated
•    Why fixed income attribution needs its own models
•    Geometric vs. Arithmetic
•    How plan sponsors should measure attribution

GIPS
•    What GIPS is, what its role is, and why it’s so important
•    Firm definition
•    Composites: what they are and why they’re important
•    What discretion means
•    How we calculate returns
•    What firms must give to prospects
•    What verification is
•    What performance examinations are
•    Why GIPS should be a requirement for external managers
•    Should plan sponsors comply?