Performance Analysis

Performance Analysis - Articles & White Papers

The Savvy Investor Performance Analysis section provides articles and white papers with in-depth analysis on the metrics used by institutional investment managers to quantify investment performance across all asset classes.

Investment performance consists of two elements: measurement and attribution. Some of our most popular research on attribution analysis considers performance attribution methodology from first principles, providing a primer on attribution analysis and models. Other white papers and reports focus on models, such as the Brinson Model, fixed income return attribution, equity attribution analysis, or the dissecting of hedge fund returns...


Most institutional asset managers are subject to best practice reporting standards for client reporting, known as the Global Investment Performance Standards (GIPS). This is incorporated for the standardisation of investment reporting and to impart investor confidence when transparency is key in considering portfolio fees, or money/time weighted rates of return.

The Brinson arithmetic model affects the portfolio managers’ ability to add value through both stock selection and timing.

Other elements to consider in performance attribution consider the variables which can influence performance and include the use of derivatives, transaction costs, or frequency of analysis.

As institutional investors scrutinise fund manager performance, the management of portfolio risk and volatility are often cited as key performance attributes by asset allocators as part of their fund manager selection process.

In light of this scrutiny, a broad array of risk-based performance attribution metrics are often employed by investment consultants to evaluate the investment performance of fund managers whose investment styles may vary. Examples of these risk-based metrics, which are rooted in mathematics and statistics, include concepts such as standard deviation, downside risk and beta.

In times of market stress, metrics like portfolio drawdown are useful. This measures the peak-to-trough declines in a portfolio’s value before a new high is reached.

Performance Analysis pertains to:

  • Investment performance (Treynor ratio, Sharpe ratio, Jensen ratio, M2, Fama’s decomposition, CAPM, WACC, MWRR, TWRR, risk-adjusted return on capital)
  • Modigliani & Miller (tax shielding)
  • Attribution (Fixed income, multi-currency, performance -holdings-based, transaction-based, returns-based, portfolio risk)
  • Global Investment Performance Standards (GIPS)
  • Skill vs luck
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