One of the more important aspects of investment solutions centers on measuring a plan’s overall performance as well as the performance of its individual managers. Our investment performance services evaluate:
In monitoring the total performance of a plan, we ensure that the portfolio is appropriately structured to meet the client’s investment goals without exceeding the risk tolerance. We help our clients by:
The analytical process employed when evaluating the performance of a client’s individual investment managers is similar in philosophy to our examination of the total plan. However, we also use in-depth analysis focusing on the investment characteristics of each manager’s portfolio to confirm that investment policy guidelines and restrictions are being followed.
Our performance evaluation process documents the risk of each portfolio based on its holdings as well as a returns-based assessment of volatility, information ratios and consistency of style. To generate the maximum value for a given level of risk, we combine quantitative, holdings-based risk analysis for equity portfolios with the Research Group’s documentation of the managers’ investment styles, typical risk postures and levels of skill. By examining the actual securities held by a particular manager, we are able to identify the areas of risk within a manager’s portfolio and the sources of return at any single point in time. We can also compare the portfolio’s risk structure over various time periods.
We conduct performance attribution, which helps us understand the reasons behind a manager’s performance and whether the manager’s performance is consistent with their stated style and expertise. We test a manager’s performance over time to assess whether the manager’s investment process has historically generated value through the risks it has taken. Our risk characterization and attribution analysis allows us to determine what types of risks are normal, desirable and likely to represent value creation opportunities.