Performance Measurement for Asset Owners and Consultants

Rates of Return

• Why percentages are used
• The role of returns to judge performance
• The role of cash flows
• Time-weighted returns: why and how it’s done
• Money-weighted returns:reporting role and why they have more value than time-weighting for plan sponsors
• When the numbers don’t make sense (and why they do!)
• Where the data comes from (external managers, in-house, custodians, consultants) and what to do with them

Benchmarks

• A review of the four major classifications of benchmarks: market indices, absolute, peer groups, and custom
• The criteria that is often used to judge benchmarks
• What benchmarks should a plan sponsor use?

Risk Management

• Risk measures versus risk-adjusted measures
• A review of the major measures and what they offer/how they compare
• Risk management:  how best to manage risk when you don’t control the investment

Attribution

• Absolute versus relative attribution
• The Brinson models: how they differ
• The interaction effect: why it’s loved, why it’s hated
• Why fixed income attribution needs its own models
• Geometric vs. Arithmetic
• How plan sponsors should measure attribution

GIPS

• What GIPS is, what its role is, and why it’s so important
• Firm definition
• Composites: what they are and why they’re important
• What discretion means
• How we calculate returns
• What firms must give to prospects
• What verification is
• What performance examinations are
• Why GIPS should be a requirement for external managers
• Should plan sponsors comply?