Professional articles and academic papers on performance analysis. Attribution analysis seeks to compare the return from a fund with the return from a benchmark, and to explain the differences by decomposing the excess return into its component parts. Some of our most popular research on attribution analysis considers performance attribution methodology from first principles, providing...
a primer on attribution analysis and models. Others white papers and reports focus on particular models, such as the Brinson Model, fixed income return attribution, equity attribution analysis, or the dissecting of hedge fund returns. A key aspect of performance is of course reporting to clients, and here the CFA provides guidance for effective investment reporting with its Principles for Investment Reporting model, known as GIPS (Global Investment Performance Standards) and encapsulated in the GIPS Handbook. A proper attribution of returns illuminates the contribution made by active managers, enabling judgements to be formed of whether excess returns have arisen from skill or luck. For most investment strategies, however, an extended period of time is required before such judgements can be made with any confidence.
Do high active risk (AR) equity portfolio managers tend to realize a relatively high information ratio (IR)? PGIM explores the AR-IR relationship across various global equity mandates and investment approaches. They find that the AR-IR relationship varies across mandates. The IR gap between Low AR and High AR managers tends…
Private equity firms have discretion over the timing of their funds' capital calls and distributions, making the popular internal rate of return an incomplete measure of private equity fund performance. Do investors avoid the textbook pitfalls of IRR when cash flow timing is partly endogenous? In our comprehensive…
When evaluating managers or strategies, investors pay close attention to the maximum drawdown, or the largest peak-to-trough return over the life of an investment. For example, for hedge fund investments, money is often pulled out when a threshold for the maximum drawdown is crossed. The maximum drawdown statistic is…
In this report, S&P Dow Jones Indices measure the performance persistence of active funds in Brazil, Chile, and Mexico that outperformed their peers over consecutive three-and five-year periods. They also analyse how their performance ranking changed over subsequent periods.
2020 was a year of two reversals for the market. First, equities recovered from the depths of March to finish the year strongly, and second, smaller-cap and value stocks staged a roaring comeback in the final quarter. This analysis has interesting implications for active management: The dominance of mega-caps hindered stock…
Mutual fund companies often judge their business performance by the growth of their assets under management (AUM) and their fund flows. But these metrics offer little insight into how a firm is faring relative to its competition.
Many investors don’t realise that a mechanical rebalancing strategy, such as a monthly or quarterly reallocation towards fixed portfolio weights, is an active strategy. Winning asset classes are sold and losers are bought. During crises, when markets are often trending, this could lead to larger drawdowns than a buy-and-hold…
A global pandemic, a rapid spike in market volatility, and a renewed push for social reform, among other events, have acted as catalysts for change in the United States this year.
Multi-asset investing has grown dramatically in popularity during the last decade. Together with passive investing, it is currently one of the fastest-growing segments of the global asset management business. However, this segment of the market has been relatively underserved by benchmark providershistorically. This is…
For decades, global investors have become conditioned to the term Asia ex(cluding) Japan. It’s a term that reflects Japan’s individual place in the current investment universe. In this week’s Quants Corner, Informa illustrate how Japan’s stock market is different – from a fund flow perspective – compared to the rest of Asia…
James Fallon, Christopher Zani, Peter Delaney provide insights on the performance of low volatility stocks during the early 2020 downturn in global markets.
Precision medicine, a novel model that proposes the customization of healthcare, with treatments, practices or products being tailored to a subgroup of patients, instead of a one-drug-fits-all model, is widely regarded as a fundamental breakthrough that will mark the start of a whole new era for medical practice. In the same…
For the first time, the SPIVA Europe Mid-Year 2020 Scorecard introduced risk-adjusted performance evaluations of European equity funds. Previously, proponents of active fund management may have criticized the SPIVA scorecard for measuring performance on a return-only basis. They may have argued that this only told one side…
