Measuring a Manager’s Trajectory – a (Very) Simple Approach

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Nearly all portfolio analysis – be it value-at-risk or performance attribution – is carried out by looking at static portfolios at given points in time. Yet when we limit ourselves to this approach, an important piece of information is getting lost: how well a fund manager’s actual investment decisions are performing.

Daniel Blum, JP Morgan

Nearly all portfolio analysis – be it value-at-risk or performance attribution – is carried out by looking at static portfolios at given points in time. Yet when we limit ourselves to this approach, an important piece of information is getting lost: how well a fund manager’s actual investment decisions are performing. By comparing the returns of a dynamically changing portfolio to its theoretical, static returns, it is possible to uncover this key additional information. This article explores this calculation, proposes a new metric, “trajectory,” to represent the impact of a fund manager’s recent bets, and shows how this measure can be used to illuminate the manager’s overall performance.

Measuring a Manager’s Trajectory – a (Very) Simple Approach

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