Performance Measurement & Evaluation

Eric Bennett, CFA, chairman and CEO of Tolleson Private Wealth Management, shares his top 10 tips for manager search and selection.

How many stock pickers who outperform this year will beat a dart board next year? The answer depends upon whether luck or skill had more to do with their results.

A seemingly endless battle is waged between believers in the efficient market hypothesis, such as Eugene Fama, and believers in behavioral finance, such as Daniel Kahneman. Regardless of your perspective, an analysis of the S&P 500’s history of sigma events provides an interesting field for the battle to be waged.

Jason Voss, CFA, provides a summary of the major research about lying and deceit behaviors, including a brief overview of dozens of research papers.

According to Carl Bacon, CIPM, chairman of StatPro, active investment managers must understand the “what, why, and how” of their past performance in order to effectively manage their current clients’ portfolios.

This Take 15 interview with James M. Edmonds, CFA, sheds light on the intricacies and challenges of performance reporting for high-net-worth investors and financial advisers. Mr. Edmonds also discusses the GIPS standards for firms managing private wealth clients and the appropriate benchmarks.

Performance attribution has become a standard requirement for institutional clients. This episode discusses practical issues selecting and implementing a fixed-income attribution system. The method requires a great deal of data and high-quality data management systems, but it could be the basis for a standard method of performance attribution in the fixed-income market.

There is a plethora of research that has documented a number of “irregularities” in self-reported hedge fund returns. These studies have found that some hedge funds reported smoothed returns, reported disproportionately more small positive returns than negative returns, and reported higher returns in December.

Iain W. McAra provides insight into the many benefits gained by firms claiming compliance with the Global Investment Performance Standards (GIPS®). He also discusses how firms can leverage compliance for stronger internal controls and better portfolio oversight.

Robert Jenkins, FSIP, cites the flaws in the traditional return on equity (ROE) measure in measuring bank financial performance and proposes some much needed alternatives.