Understanding Your Investment Reports

Transcription

1 Understanding Your Investment Reports Portfolio Manager Guide

2 Table of Contents Introducing You to Portfolio Manager Consolidated Report... 4 Allocation Summary... 5 Performance Summary... 6 Performance Detail... 7 Variable Annuity... 8 Estimated Income... 9 Realized Gains and Losses Unrealized Gains and Losses Cumulative Performance Comparative Analysis Multi-Period Performance Portfolio Appraisal Advisory Performance Understanding Performance Money-Weighted Method Time-Weighted Method Glossary of Terms and Report Labels UNDERSTANDING YOUR INVESTMENT REPORTS 2

3 Introducing You to Portfolio Manager Portfolio Manager is a robust reporting tool that enables you to report on the investment performance of accounts, create client-approved reports and streamline BranchNet operations. Why is investment performance important? The rate of return on an account (or group of accounts) indicates the percentage change in money invested, weighted by the timing (when) and amount (size) of transactions of the underlying investments over the selected valuation period of the report. Essentially, it allows you to show your clients what you are doing for them from an investment perspective. You can compare performance to standard benchmarks to illustrate the value of your investment advice. Portfolio Manager allows you to answer many of your clients questions with various client-approved performance and consolidated reports. It can calculate the market value of assets on a particular date, the rate of return over a specified period of time, comparisons to benchmarks and how much income clients may receive from their investments going forward. Analyze performance calculations on: LPL Financial accounts (Brokerage & Advisory) Direct business accounts Third-party asset manager Portfolio Manager also gives you the ability to organize your client accounts by households and custom groups, allowing you to search for and view consolidated information more efficiently. The software allows you to quickly find all accounts and positions held by a client or household in one convenient location, offering multiple views of your aggregate data. Please review the following sections to understand the available reports within Portfolio Manager, as well as how performance is calculated. UNDERSTANDING YOUR INVESTMENT REPORTS 3

4 Consolidated Report This dashboard style report combines many of the features found among other Portfolio Manager reports. These features include but are not limited to account-level performance, group-level asset class breakdowns, position detail, contribution totals and withdrawal totals. The report which can be run in conjunction with other Portfolio Manager reports can be run for a single account or for a group of accounts. xx xx The pie chart can represent asset classes, security types or accounts. If a pie chart slice is less than 2.5%, the value will be included under the Other section. xx xx REIT Real Estate Investment Trust LBL LBL Large Cap U.S. Blend Equity REIT Select a relevant timeframe to show the performance of the account(s). Inception-to-date performance can also be displayed. The performance of the account is compared to the appropriate market indices here. Up to three benchmarks selected by you can be displayed. UNDERSTANDING YOUR INVESTMENT REPORTS 4

5 Allocation Summary This report displays how investments are allocated by asset class. It can also display allocation by type of security (for example, common stocks versus preferred stock), or how each account s value contributes to the entire portfolio. This report can also show the breakdown of accounts with one slice for each account. This report illustrates the allocation of investments in a pie chart accompanied by a detailed key. UNCL 23.05% MV 2.67% AO 3.28% LS 7.83% LB 12.98% SECT 4.10% SI 3.21% BAL 13.64% CASH 5.80% SV 2.57% Other 6.09% SEM 3.13% ILB 3.17% MTG 4.37% LTM 4.11% The pie chart represents asset classes, security types or accounts. Asset classes that are less than 2% of the total are grouped into the Other category. Asset Class Asset Class Description Market Value ($) % of Assets SV Small Cap U.S. Value Equity 15, LV Large Cap U.S. Value Equity 4, LG Large Cap U.S. Growth Equity 2, LBL Large Cap U.S. Blend Equity 11, SEM Small Cap Foreign / Emerging Market Equity 18, ILB Intermediate/Long-Term High-Quality U.S. Bond 18, MTG Mortgage Backed Security 25, HYB Intermediate/Long-Term High-Yield Bond 8, FB Intermediate/Long-Term Foreign Bond 2, LTM Long-Term Municipal Bond 24, BAL U.S. Balanced / Asset Allocation 80, SGS Small Cap Global Equity 3, GBAL Global Balanced / Asset Allocation 2, SI Strategic Income 18, SECT Sector 24, LB Long-Term High Quality U.S. Bond 76, UNCL Unclassified 135, MV Mid Cap U.S. Value Equity 15, AO Tactical 19, LS Long/Short Fund 46, CASH Cash and Equivalents 34, The key table lets you easily see the market value of each asset class, security type or account and what percentage of your total assets it represents as of a specific date. Totals: $588, % UNDERSTANDING YOUR INVESTMENT REPORTS 5

6 Performance Summary This report allows you to track investments over a specified period of time, as well as the total performance since accounts were opened. It displays contributions and withdrawals, and compares them to the current value of the accounts. Inflows and outflows describe how much was added or withdrawn from the account(s). This graph plots your net investment versus market value. xxxx xxxx xxxx xxxx xxxx xxxx The Investment Details section provides market value, net investment information and returns for each account. Net Invested Dollars is the sum between inflows and outflows since inception of an account or group. UNDERSTANDING YOUR INVESTMENT REPORTS 6

7 Performance Detail This report shows contributions to and/or withdrawals from securities with your clients accounts. Additional details provided include dividends, interest and capital payments, all of which are factors that contribute to the performance of the individual positions and the account(s) in general. Investments can be grouped by asset class, security type or account to display performance. A comparison of accounts and asset classes against corresponding benchmarks is shown here. The inflows, outflows, dividends, interest and capital payments for each security are displayed here. Performance to Benchmark Summary Asset Class Return % (IRR) Benchmark Benchmark Rtn % (IRR) AO - Tactical BAL - U.S. Balanced / Asset Allocation BL - Bank loan 6.40 CASH - Cash and Equivalents 0.00 Citigroup 3-Month Treasury Bill 0.27 EMB - Emerging Markets Bond FB - Intermediate/Long-Term Foreign Bond 3.20 S&P/Citigroup World Government Bond Index (All Maturities) GBAL - Global Balanced / Asset Allocation HYB - Intermediate/Long-Term High-Yield Bond ILB - Intermediate/Long-Term High-Quality U.S. Bond N/A Barclays Capital U.S. Corporate High Yield Index Barclays Capital U.S. Aggregate Bond Index LB - Long-Term High Quality U.S. Bond Barclays Capital U.S. Government Credit 0.00 Long Bond Index LBL - Large Cap U.S. Blend Equity Russell 1000 Index LF - Large Cap Foreign Equity (12.37) MSCI EAFE - Net Dividends N/A LG - Large Cap U.S. Growth Equity Russell 1000 Growth Index LS - Long/Short Fund 5.81 LTM - Long-Term Municipal Bond LV - Large Cap U.S. Value Equity Russell 1000 Value Index MG - Mid Cap U.S. Growth Equity Russell Mid-Cap Growth Index MTG - Mortgage Backed Security 7.48 Barclays Capital Fixed Rate Mortgage 2.07 Backed Securities Index MV - Mid Cap U.S. Value Equity Russell Mid-Cap Value Index REIT - Real Estate Investment Trust SBL - Small Cap U.S. Blend Equity (13.77) Russell 2000 Index (13.31) SECT - Sector 9.05 SEM - Small Cap Foreign / Emerging Market Equity MSCI Emerging Markets Free - Net Dividends SGS - Small Cap Global Equity 6.66 SI - Strategic Income 8.46 SV - Small Cap U.S. Value Equity Russell 2000 Value Index UNCL - Unclassified 6.48 Returns for asset classes and their corresponding benchmarks are weighted on the time that the asset class was held during the report period, which may be less than the time that the group or account was held during the report period. N/A Return % (IRR) Your Group Benchmark Return % (IRR) Growth w/income Benchmark UNDERSTANDING YOUR INVESTMENT REPORTS 7

8 Performance Detail Report: Variable Annuity View This report shows the analysis of a variable annuity by subaccount, with security and performance values for each position held in the account. Portfolio Manager can also provide a portfolio percentage based on asset allocation. The values displayed are useful to understand the performance of variable annuity subaccounts. Each row represents a subaccount in the variable annuity. Performance is listed by subaccount for the valuation period chosen. UNDERSTANDING YOUR INVESTMENT REPORTS 8

9 Estimated Income This report displays estimated payments from income generating holdings such as bonds and mutual funds. This chart totals income by month and shows the estimated contribution of each of your accounts to the total estimated income. The only securities displayed on this page are income-producing securities. The projected income is displayed by month for each security JOSHUA MORALES - Caldwell & Orkin - Joshua Morales Market Next Pay ($) Security ID Description Quantity Value ($) Date Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Total Yield ADAIX AQR DIVERSIFIED ARBITRAGE CL I 2, , /17/ % DBLTX DOUBLELINE 2, , /03/ , % TOTAL RETURN BOND CL I EIHMX EATON VANCE NATIONAL 2, , /31/ , % MUNICIPAL INCOME CL I EKBYX WELLS FARGO ADVANTAGE 2, , /14/ % DIVERSIFIED CAP BUILDER INSTL CL HIEMX VIRTUS EMERGING 1, , /20/ % MARKETS OPPORTUNITIES CL I HWHAX HOTCHKIS & WILEY , /02/ % HIGH YIELD CL A The bar chart presents your estimated income stream for easy viewing Dollars($) Feb $378 Mar $577 Projected Total Income by Month Apr May Jun Jul Aug Sep Oct Nov Dec Jan $378 $378 $725 $378 $378 $577 $378 $378 $1,436 $378 Total projected income by month is displayed here. The colored sections in the bars represent each account that contributes to your monthly estimated income. UNDERSTANDING YOUR INVESTMENT REPORTS 9

10 Realized Gains and Losses This report provides the profit or loss for each security that has been bought and sold by tax lot. In LPL Financial accounts, this information can be useful in estimating capital gains and losses, but should not be used for official tax purposes. Use Confirms and Form 1099 for official tax reporting. This report does not include cost basis information for positions held outside of LPL Financial accounts. Shows when securities were bought and sold, and what gains or losses were incurred. If complete cost basis information is not available, N/A will be shown. UNDERSTANDING YOUR INVESTMENT REPORTS 10

11 Unrealized Gains and Losses This report keeps track of purchases and their cost. It provides purchase information on each individual security in an LPL Financial account, compared to the current value, to calculate the unrealized profit or loss. Please keep in mind that liquidation values may vary. This report does not include cost basis information for positions held outside of LPL Financial accounts, and therefore, gain/loss reports are only available for LPL Financial accounts. Dates and purchase prices shown here. UNDERSTANDING YOUR INVESTMENT REPORTS 11

12 Cumulative Performance This report presents a comparison of investment performance to market indices, such as the Dow Jones Industrial Average or the S&P 500 on a quarterly basis. Performance is cumulative, with each quarter factoring in performance of each of the prior quarters. It helps answer the question, How did my investment recommendations perform compared to the market? The timeframe for which the performance is compared is displayed here. This graph displays how investments have performed within a specific time period as compared to the returns of selected market indices. This table provides quarterly performance information for your selected account/group and chosen market indices. The return rates displayed in the Account Summary section are calculated using a time weighted or a money-weighted (Internal Rate of Return - IRR) calculations. UNDERSTANDING YOUR INVESTMENT REPORTS 12

13 Comparative Analysis This report answers the question, How did an account change in value between two points in time? For example, how does the current value of an account compare to the value when you last reviewed it with your client? The securities in this report can also be grouped by asset class, security type or account number. The two dates being compared are shown in the report header. This section compares the market value of your accounts on two different dates and displays the return for the period. UNDERSTANDING YOUR INVESTMENT REPORTS 13

14 Multi-Period Performance Similar to the Cumulative Performance Report, the Multi-Period Performance Report compares investment returns versus market indices. Rather than comparing performance over a period of time, this report selects up to seven specific time intervals, such as year-to-date or five-year returns, to compare the performance of an account. Multi Period Performance PERRY HOUSEHOLD INVESTMENT GROUP Prepared by: Gregory Green Rate of Return % Year To Date 3 Year Inception to Date PERRY HOUSEHOLD INVESTMENT GROUP (IRR) Growth w/income Benchmark (IRR) Year To Date 3 Year Inception (12/2/2008) to Date 0.52% 11.99% 30.66% 2.22% 31.49% 44.08% LPL Growth with Income Benchmark is calculated using a weighted average of the following indices, in the specified percentages: 5% Citigroup 3-Month Treasury Bill, 35% Barclay's Capital Aggregate U.S. Bond Index, and 60% Russell 3000 Index. Indices and benchmarks are unmanaged and cannot be invested into directly. The performance of assets is compared to the market indices selected in the graph and table. UNDERSTANDING YOUR INVESTMENT REPORTS 14

15 Portfolio Appraisal This report gives you the market value of your overall account and each security within your account. It also reflects performance or market value as of a historical date, such as today s date last year. Knowing the total value of your accounts in combination with how they have performed helps you track your clients complete financial picture. If the current date is used, cost basis and unrealized gain/loss are available for certain accounts. Location refers to where that particular account is held. See the specific market value here. Securities from all accounts are grouped by asset class, account or security type. This section shows you the details for each security in your account, including their market values and weighting. UNDERSTANDING YOUR INVESTMENT REPORTS 15

16 Advisory Performance This report, for LPL Financial Strategic Asset Management, Optimum Market Portfolios-Advisory and other advisory accounts, provides a simple snapshot of how the account is allocated, how it has performed and how it compares to selected market benchmarks. This is especially helpful to calculate performance in between Quarterly Performance Reports provided by Advisory Consulting. The account s against the amount invested is shown in this chart. Your LPL Financial Advisor: Prepared on: 1/9/20XX 476 Lake Street FOLSOM CA Portfolio Summary Account #: Strategic Asset Management (464) Investment Summary Market Value Percentage Mutual Funds/Closed-end Funds/ETFs 593, % Equities 2,157, % Cash and Equivalents 223, % Fixed Income % Total: $2,974, % $300,000 $295,000 $290,000 $285,000 $280,000 $275,000 $270,000 $299,238 $270,940 $265,000 Jul 2011 Oct 2011 Jan 2012 Apr 2012 Jul 2012 Oct 2012 Jan 2013 As Of: 01/08/2014 Market Value Net Invested Dollars As Of: 1/31/2013 Performance History Inception Date: 4/29/2011 Last 3 Months Year To Date Last 12 Months Inception To Date Annualized Inception To Date Inception Date Your Account 0.41% 0.48% 6.95% 10.44% 8.82% N/A Consumer Price Index (CPI) Adjusted 1-month lag -0.19% -0.02% 1.74% 3.35% 1.90% N/A Barclays Capital U.S. Aggregate Bond Index -0.68% -0.70% 2.59% 9.74% 5.44% N/A Barclays Capital U.S. Corporate High Yield Index 3.76% 1.34% 13.91% 16.80% 9.25% N/A S&P 500 Index 6.75% 5.18% 16.78% 14.24% 7.88% N/A Russell 2000 Index 10.63% 6.26% 15.47% 6.93% 3.89% N/A Russell 3000 Index 7.61% 5.49% 16.90% 13.25% 7.35% N/A As Of: 1/31/2013 The performance of the account is compared to the appropriate market indices here. UNDERSTANDING YOUR INVESTMENT REPORTS 16

17 Understanding Performance Considering the significance of performance reporting and the role it plays in articulating your value to clients, it is important to understand how Portfolio Manager calculates the various of rates of return and other data points. The rate of return, shown as a percentage, on several of the reports is a mathematical representation of investment performance. Two different performance calculation methods are used to create the reports. While their results may be different, each number can tell a different and useful story. For each report, you will have the option to select either money-weighted or time-weighted. The only report that does not give you the option is the Advisory Performance Report. This report is only available using the time-weighted method. Money-Weighted Method Basic Explanation: The money-weighted return method can be used to depict the client s personal rate of return. This calculation accounts for all contributions and withdrawals into and out of the account, and represents the average rate of return the client earned on all money invested during the evaluation period. This is useful if the client determines how much and when to invest. Detailed Explanation: The money-weighted return represents the performance of the specific client s portfolio holdings. This calculation is influenced by the client s timing and amount of cash flows, and measures the performance of the portfolio rather than the performance of the investment manager. Money-weighted returns add further value in understanding the impact to the client of the timing of external cash flows, but are less useful for comparing one firm/manager to another. In money-weighted return methodology, each cash flow is weighted by the amount of time it is held in the portfolio and the size of that cash flow. The moneyweighted return is the compound growth rate of all dollars invested. Formula: MV 0 MV 0 MV 1 0 = + + (1 x IRR)W(0) (1 x IRR)W(i) (1 x IRR)W(1) Where: MV 0 = Full market value of the portfolio, including accrued income, at the beginning of the period MV 1 = Full market value of the portfolio, including accrued income, at the end of the period IRR = Internal return rate w(i)= D i /CD D i = The number of calendar days from the beginning of the period that cash flow CFi occurs CD = The total number of calendar days in the measurement period CF i = Cash flow i Calculation Process: In calculating the money-weighted return, the methodology uses an iterative process for determining the value of internal rate of return that equates to the value of the account (MV 1 ) to 0 (zero). Time-Weighted and Money-Weighted Comparison When time-weighted and money-weighted returns are compared, time-weighted allows clients to better compare performance against other money managers, while money-weighted better represents clients actual investment experience. UNDERSTANDING YOUR INVESTMENT REPORTS 17

18 Time-Weighted Method Basic Explanation: The time-weighted method is used to depict the account s relative rate of return. This calculation is not sensitive to cash flows (contributions and withdrawals) into and out of the account and represents the average rate of return clients earned independent of their buy/sell decisions. Detailed Explanation: The time-weighted return is generally used to measure the performance of an individual mutual fund or manager, or to provide for relative performance of a portfolio versus a benchmark. In this methodology, the amount of money invested is neutralized in the calculation because contributions and withdrawals by the client are not under the control of the manager. The time-weighted return over a certain period depends only on the length of this period and not on the amount invested the return is time-weighted. The calculation requires revaluing the portfolio each time a net contribution occurs (which does not necessary mean daily valuation ). That is, every buy and sell decision creates a cash flow in the portfolio; therefore, the portfolio has to be revalued every time a transaction takes place. Each cash flow is weighted by the amount of time it is held in the portfolio. The time-weighted return is the compound growth rate of a single dollar invested. Formula: Step 1: r Mod = MV 1 MV 0 CF MV 0 + (CF 1 x W 1 ) Step 2: r ewp = (1 1 + r es x (1 + r es ) x...x (1 + r es ) 1 MV 1 =Ending Market Value MV 0 =Beginning Market Value W=Weight Factor (W=CD-D / CD) CF=Cash Flows Calculation process: 1. Price portfolio immediately prior to any cash flows or at the end of every day 2. Break overall valuation period into sub-periods based on when cash flows occur or daily 3. Calculate a HPR (holding period return) for each sub-period 4. Geometrically link the sub-period returns together over entire valuation period Here s an example to clarify the difference of these two methods: Two investors begin by buying 100 shares at the end of the year s NAV ($10), starting off with $1,000. The first investor makes two subsequent purchases of 100 shares each, one at the end of May ($14 NAV) and the other at the end of August ($15 NAV). The second investor also makes two additional purchases of 100 shares each, but hers are at the end of April ($8 NAV) and September ($9 NAV). The fund s NAV closes the year at $11, meaning the fund is up 10%. The first investor shows a loss of $600, while the second shows a gain of $600. The time-weighted return for each investor is 10%. The money-weighted return for the first investor is % and the second investor is %. Investor 1 Investor 2 Dec: 100 $10/ps May: 100 $14/ps Dec: 100 $10/ps Apr: 100 $8/ps Aug: 100 $15/ps Sep: 100 $9/ps TWR 10% 10% MWR % 35.16% UNDERSTANDING YOUR INVESTMENT REPORTS 18

19 Glossary of Terms and Report Labels Note: Additional definitions may be found in the Understanding Your Assets or Understanding Your Performance sections. Advisory Fee Account fees (if any) paid to LPL Financial and to you for respective services provided on advisory accounts. Please see the Advisory Client Agreement for more details. Annualized Return Compound average of cumulative returns over multiple years. Please see the Understanding Performance Calculations section of this brochure for more details. Capital Gain An increase in the value of an asset. It is calculated by the difference in price at which an investment was purchased and the price at which it was sold. Cost Basis The original price of an asset, used to determine capital gains. Covered A written option is considered to be covered if the writer also has an opposing market position on a share-for-share basis in the underlying security. Custodians Financial institution responsible for safeguarding a firm s or individual s financial assets. Direct Business Assets held directly with carrier or sponsor. LPL Financial is not the custodian for these assets. Dividend A payment made by a company to its shareholders. Inception Date that your account was opened. This date may be different from the date you deposited cash and/or securities. Inflows Can occur at the security or account level. Money or securities you have contributed to your account. Dividends, interest and capital gains are reflected separately from inflows. Interest Payment for the use of money lent to an issuer of a bond or preferred stock. Loc Shows where the type of accounts are held. Positions may be held in an LPL Financial account, directly with an investment sponsor such as a mutual fund or annuity company (outside, OUT, or abbreviated sponsor name) or other sources that are provided by you and manually input by your financial advisor (U). Market Fluctuation Change in the value of the investment less contributions, withdrawals, dividends, interest, capital payments and fees. Market Value The price of a security times the quantity of shares held and typically reflected as of a specific date. For options and futures, the whole conversion factor is used. For factorable securities, the unit quantity is used. Net Invested Dollars The amount of money or securities invested in the account, minus the amount removed from the account. This best represents how much money has been invested in the account. Outflows Can occur at the security or account level. Money or securities you have withdrawn from your account, which may be in the form of a check, proceeds from a sale of securities or transfers of securities from one account to another. Purchase Cost The price paid for a security. Purchase Dates Purchase dates are captured for each security bought for your LPL Financial account. If you purchase additional shares of a security, the first purchase date will be reflected as the purchase date. Total Return Measure of investment performance that is inclusive of income. Reference the full disclosure report to see a comprehensive list of terms and definitions. UNDERSTANDING YOUR INVESTMENT REPORTS 19

20 Member FINRA/SIPC For broker/dealer use only. Not for distribution to the public. AFT