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Foundation course in
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The Fundamentals of
Performance Measurement and Attribution
Monday 18th, Tuesday 19th & Wednesday 20th February 2008, Central London
A unique 3 day course designed to give a thorough understanding of the fundamentals
of performance measurement, ranging from basic return calculation, risk-adjusted
performance measurement, achieving GIPS® compliance to advanced multi-currency,
multi-period attribution techniques.
Key course objectives:
Understand the concepts of performance measurement
Learn the different ways to derive returns (and why the results can vary)
Comprehend how cashflows affect the returns
Analyse the principles of benchmarking
Ascertain why risk measurement and management are important and what the measures mean
Discern the role of attribution, the challenges in getting it right, and how it should be used
Understand the differences and difficulties of Fixed Income Attribution
Learn the status and application of the different international performance measurement standards
The subject matter will be learned through class lectures, interactive discussion, practical examples and team
exercises.
Who should attend?
The programme is designed for staff in performance measurement teams, investment/portfolio managers,
equity and fixed income analysts, risk controllers, compliance staff, marketing managers, IT managers, fund
managers, portfolio managers and trustees and administrators, who would benefit from a good understanding
of performance measurement, risk and attribution.
The learning process
The course will be taught through a mixture of presentation, discussion and team quizzes. To facilitate this,
delegates will be seated round-table style and will be encouraged to work together in the practical sessions. It
is often within these practical sessions that the most useful information is re-enforced: application of what has
been learned is often the best way of remembering. Delegates will work in small teams on specifically
designed examples to help illustrate the points made in presentations and discussion. You will be encouraged
to raise specific issues relevant to your company and share experiences with fellow delegates.
Course format
The course will be run in an interactive fashion. Delegates will be expected to ask and answer questions (it is
one of Key Lime's core philosophies that if people are not asking questions they are not learning), participate
in the round-table quizzes and enjoy the course (another core philosophy of Key Lime Events is that people
learn better when they are not bored!).
Course cost
The cost of the 3 day course is only £1495 + VAT per delegate (approximately €1,980 or €2320 including
VAT) or. Book before 10 February and receive a free copy of Carl Bacon’s excellent new book “Practical
Portfolio Performance Measurement and Attribution”
What you will learn
By the end of the course participants will be able to:
1. Calculate performance returns
2. Understand the difference between money and time-weighted returns and when one or the other might
be appropriate
3. Determine how large cashflows impact on performance returns
4. Assess and calculate customised benchmarks
5. Analyse what the attributes of a good benchmark are
6. Comprehend the basics of performance attribution
7. Interpret an attribution report
8. Work out basic risk-adjusted returns
9. Identify the different risk types in asset management
10. Evaluate portfolios using risk measures
11. Have a good working knowledge Know the benefits of the GIPS® and AIMR standards
12. Understand the benefits and purpose of verification
The learning process
Sitting in rows listening to someone at the front talk all day is not the most
interesting way of learning (remember school?). Rather the course will be taught through
a mixture of presentation, discussion and team quizzes. To
facilitate this, delegates will be seated in a u-shaped style and will
be encouraged to work together in the quiz sections. It is often
within the quiz sessions that the most useful information is re-
enforced: practical application of what has been learned is often the best way of
remembering.
Certificate of Completion
Key Lime Philosophy
To provide the very best financial markets training courses and events by Each person who
sticking to a simple formula: completes the
1) the course presenters should be the best available course will receive a
2) the content of the events should be topical, necessary and complete certificate, signed
by the course
3) the events should be interactive: if there are no questions asked, people presenter.
are not learning
4) the events should be fun - people do not learn in a stale environment
Course Agenda
Day 1
Introduction and overview
Understanding what Performance Measurement is and why it is important
The Performance Measurement process
An overview of the basic calculations
How currency affects the calculations
The difference between time weighted and money weighted returns
Practical exercise: Return calculations for an Emerging Markets portfolio
Why Benchmarks are used and their importance
The attributes of good Benchmarks
The benefits and drawbacks of Peer Groups, Indexes and Random Portfolios?
How to do Index Calculations
Practical exercise: Customised Benchmark Calculations
Excess Returns - Geometric or arithmetic?
A guide to Performance Fees
An Introduction to Performance Attribution
Attribution as a management tool
The Brinson Model
Geometric Attribution
Practical exercise: Be a portfolio manager for a year attribution exercise
Day 2
Comprehending Performance Standards
Background to performance standards
“The Devil is in the Detail”
Why have performance standards?
How performance standards are verified
Future Governance
Practical exercise: a) Definition of Firm
b) Definition of Discretion
c) Composite allocation
Measuring Portfolio Risk
The different risk types in asset management
Currently used Risk Controls
The difference types of risk: Ex-post, Ex-ante Risk
Absolute, relative and regression risk measures
Understanding the Sharpe ratio
The Information Ratio
M2 and its importance
The different Regression Statistics
- Jensen’s alpha
- Beta
- Covariance
- Correlation
- R2
Fama decomposition
GH1 & GH2
Practical Exercise: Portfolio Evaluation
Risk-adjusted performance Measurement for hedge fund and hedge-type funds
Skewness & Kurtosis
Bera- Jacque Test
Downside risk
- Sortino ratio
- Upside Potential ratio
- VaR
- Omega
Practical Exercise: Detailed risk calculations from raw data
Adjusted Sharpe Ratio
Modified Sharpe Ratio
Prospect Ratio
Drawdown
- Sterling ratio
- Calmar ratio
- Burke ratio
- Sterling-Calmar ratio
- Pain index
- Ulcer index
- Pain ratio
- Marin ratio
Practical Exercise: Risk-adjusted performance measurement for Hedge Funds
Omega Excess Return
Hurst Index
Effective Risk Control actions
Risk infrastructure
Day 3
Further Attribution
Multi-currency attribution
i. Ankrim and Hensel
ii. Karnosky & Singer
iii. Bacon
Practical Exercise (Multi-currency geometric attribution exercise)
Attribution issues
The evolution of attribution methodologies
Security level attribution
Multi-level Attribution
Smoothing algorithms
i. Carino
ii. Menchero
iii. GRAP
iv. Frongello
Practical exercise : Team discussion which is the best method using previous exercise data
Fixed Income Attribution
Campesi Framework
Weighted Duration (Van Breukelen) Attribution
Yield curve decomposition
Practical Exercise: Weighted Duration Attribution
Derivatives in Performance Measurement
Forwards
Futures
Swaps
Options
Alternative Attribution
Market Neutral
130/30 Funds
Leverage
Futures
COURSE DIRECTOR:
Carl Bacon joined StatPro Group plc as Chairman in April 2000. StatPro develops and markets specialist
middle office reporting software to the asset management industry. Carl also runs his own consultancy
business providing advice to asset managers on various risk and performance measurement issues.
Prior to joining StatPro Carl was 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 an executive committee member
of Investment-Performance.com. A founder member of both the Investment Performance Council and GIPS®,
Carl is ex-chair the IPC Interpretations & IPC Verification Sub-Committees, and is a member of the Advisory
Board of the Journal of Performance Measurement.
Carl is also the author of “Practical Portfolio Performance Measurement & Attribution” part of the Wiley
Finance Series, and editor of “Advanced Portfolio Attribution Analysis”
Booking form
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Introduction to Performance
Measurement and Attribution Fax the completed
booking form:
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Monday 18th, Tuesday 19 & Wednesday 20 February Telephone the
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