Since 1991, our expertise in performance measurement has continued to grow exponentially, and we’ve aggregated some of our most helpful knowledge into industry white papers. These papers provide additional considerations for you to use in analyzing performance data, understanding anomalies, and assessing when to use what calculation in varying scenarios.

Justifying the Cost of a Complete Performance System

Automated processing is a requirement to handle the vast amounts of data, calculations, and reporting required today. In addressing the expanding reporting requirements, firms have a multitude of choices to make, including whether to deal with a single vendor that provides a complete solution or to satisfy these requirements through a plethora of software providers. This paper covers the alternatives in addressing the automation function, as it’s one that all investment firms must confront.

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Evaluating the Performance of Alternative Investments

Investments in alternative investment strategies have grown significantly since the 1990’s as investors seek performance with higher return potential than available from traditional asset classes. These assets are an important component of future investment portfolios. However, the strategies are more complex and difficult to evaluate.


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Mutual Fund Investor Performance Variance Factors

There are a wide range of reasons for an investor in a mutual fund to receive performance that differs from published mutual fund performance. Both taxable and non-taxable fund investors can receive different realized performance from a mutual fund dependent upon factors unique to the investor. This paper reviews the key reasons why the actual performance received by mutual fund shareholders can differ from the published fund performance.

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Understanding Total Portfolio and Portfolio Component Return Relationships

When there are significant cash flows resulting in intra-period component reallocations, the estimated weighted total portfolio return can differ significantly from the weighted average return. This paper examines the sources and magnitude of this error. The results show that the error is significant when there are significant cash flows, return volatility and a low correlation between component returns. It also illustrates which estimation approach is more accurate for estimating total portfolio money-weighted returns and time-weighted returns.

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Which Return is Right for You?: TWR vs. MWR

There are two primary portfolio return measures available to investors to better evaluate investment success. This paper explains the use of time-weighted and money-weighted returns. Several factors are considered when selecting the appropriate return measure to use including: purpose (what or who is being measured), benchmarks, cash flow control, liquidity, computational considerations and report availability.

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Enhancing Risk Measurement in a Volatile Market: Is a Meltdown in Your Future? - How to Effectively Assess the Portfolio Risk Control Process

Since the recent financial meltdown beginning in late 2007, there has been a renewed emphasis on financial risk controls. First Rate has developed its performance measurement product with risk metrics to provide feedback to investment managers and their clients. The First Rate risk metrics are highlighted in this white paper. These measures are designed to evaluate risk on a single account or monitor risk control across several accounts.

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Risk-Adjusted Performance Measurement Issues in a Bear Market: What Method to Use When Excess Returns are Negative?

Investment professionals need to re-evaluate their use of risk adjusted performance measures in bear markets. Common risk adjusted measures such as the Sharpe ratio or Treynor ratio are more useful for comparative analysis when the excess returns are positive. This paper covers the need for special consideration of these metrics when excess returns are negative as would be expected in bear markets.

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Risk Measures Provide Portfolio Appraisal and Comparative Analysis

First Rate offers a wide range of portfolio risk measures with multiple objectives. Current portfolio return and risk should be appraised on an ongoing basis to make certain that client guidelines are followed and that performance results were achieved at acceptable risk levels. This paper provides a description of a wide range of portfolio risk measures offered by First Rate. The development and use of these measures are explained and then demonstrated in a case study evaluation of three managers relative to a benchmark. A commentary on implementation issues is also provided.

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