Performance and Attribution Training Led by Carl Bacon

Transcription

1 1 Performance and Attribution Training Led by Carl Bacon PERFORMANCE MEASUREMENT ATTRIBUTION RISK-ADJUSTED PERFORMANCE MEASUREMENT TRAINING SCHEDULE Date Session Title Page 12 th November 2018 Introduction to Performance Measurement and Attribution 2 13 th 14 th November 2018 Advanced Attribution and Advanced Risk 3-5 Carl Bacon CIPM, founded Otos Ltd in April Otos Ltd provides advice to asset managers on various risk and performance measurement issues. Carl was Chairman of StatPro Plc from 2000 to 2017 and prior to that Director of Risk Control and Performance at Foreign & Colonial Management Ltd, Vice President Head of Performance (Europe) for J P Morgan Investment Management Inc., and Head of Performance for Royal Insurance Asset Management. Carl holds a B.Sc. Hons. in Mathematics from Manchester University and is a member of the Advisory Board of the Journal of Performance Measurement. A founder member of both the Investment Performance Council and GIPS, Carl is a chair of the GIPS Executive Committee, and ex-chair of both the Verification and Interpretation Sub-Committees, and founder of "The Freedom Index Company" Carl is also the author of Practical Portfolio Performance Measurement & Attribution part of the Wiley Finance Series, "Practical Risk-adjusted Performance Measurement", numerous articles and papers and editor of Advanced Portfolio Attribution Analysis. 1

2 2 Introduction to Performance Measurement and Attribution Course objective An intensive master class for investment professionals and other key players in the investment chain who wish to increase their technical knowledge, gain a detail understanding of all aspects of performance return attribution and develop a broader understanding of the complete range of risk-adjusted performance measures. Pre-requisites Participants will be required to have a basic knowledge of how to use excel spreadsheets. If possible participants should bring their own laptop with excel loaded. Attendees will be asked to work in teams of two or three on excel-based practical exercises. Introduction 12 TH NOVEMBER 2018 What is performance measurement? Basic calculations Currency effect Time weighted or money weighted? Timing of cash flow Practical exercise Benchmarks Attributes of good benchmarks Peer Groups or Indexes Index calculations Excess returns Geometric or arithmetic Performance fees Basic Attribution Attribution as a management tool The Brinson Models Geometric Attribution Practical exercise Performance Standards GIPS Background Why do it? Verification 2

3 3 Advanced Attribution & Risk Adjusted Performance Measurement 13 TH 14 TH NOVEMBER 2018 PART 1: ADVANCED ATTRIBUTION Basic Attribution Why measure performance? Definition of attribution Attribution as a management tool Recap of the Brinson Model Advanced Attribution Evolution of attribution methodologies Types of attribution Attribution issues Holdings, transaction and returns based attribution Off-benchmark investing Security level attribution Multi-period Attribution Smoothing algorithms GRAP Carino Menchero Frongello Geometric Multi-currency Attribution Karnosky & Singer Naïve Currency Attribution Geometric multi-currency Forward currency contracts Practical session multi-currency attribution including forward currency contracts Fixed Income Attribution Why is Fixed Income attribution so different? Campisi framework Weighted Duration Attribution Yield Curve Decomposition Practical session weighted duration attribution emphasising the differences between Fixed Income and equity style (Brinson) attribution 3

4 4 Attribution for Derivatives Futures, options and swaps Leverage & overlay Market Neutral 130/30 Funds Multi-level & balanced attribution PART 2: RISK ADJUSTED PERFORMANCE MEASUREMENT Risk Risk types in Asset Management Compliance Risk Operational Risk Counterparty Risk Portfolio Risk Guidelines for effective risk control in an asset management firm. What is the ideal control infrastructure? Risk-adjusted Performance Measurement Ex-post, Ex-ante Common Risk Measures (absolute, relative & regression measures) Sharpe Information Ratio (original & modified) M 2 Jensen s alpha, Beta, Co-variance, Correlation and R 2 Appraisal ratio, Modified Jensen Fama Decomposition GH1 and GH2 Practical session Performance Evaluation calculate a range of risk measures for five portfolios and rank in order of preference Return Distributions Skewness Kurtosis Bera-Jacque Test Adjusted Sharpe Ratio Risk-Adjusted measures for Hedge Funds Drawdown Calmar (MAR ratio) Sterling (original & modified) Burke Sterling Calmar Ulcer Index, Pain Index Martin Ratio, Pain Ratio 4

5 5 Downside risk Sortino Upside Potential Ratio Omega, Omega Sharpe Ratio, Bernado-Ledoit Ratio Prospect Ratio Value at Risk Return to VaR Conditional VaR, Expected Shortfall Conditional Sharpe Ratio Modified Sharpe Ratio Practical session- Risk Measures - calculate a range of risk measures from raw data (without excel functions) Practical session Risk Measures for Hedge Funds - Calculate additional risk measures used in the hedge fund and commodity fund area Practical issues Why measure ex-post? A Periodic Table of Risk Measures 5