<br />
THE JOURNAL OF<br />
PERFORMANCE<br />
MEASUREMENT®<br />
THE PERFORMANCE MEASUREMENT RESOURCE VOLUME 23 : NUMBER 3<br />
INSIDE THIS ISSUE - SPRING 2019<br />
n PORTFOLIO MANAGEMENT VIA A HOLISTIC AND<br />
EFFICIENCY-DRIVEN DECISION PROCESS<br />
n HOW BEST TO ANNUALIZE RATES OF RETURN<br />
n THE JOURNAL INTERVIEW - BRIAN D. SINGER, CFA<br />
n MULTI-PERIOD CONTRIBUTION ANALYSIS - PART 1<br />
n HIGH AND HIGHER ACCURACY ANALYTICAL APPROXIMATIONS<br />
OF THE INTERNAL RATE OF RETURN<br />
n GLOBAL ASSET MANAGEMENT AND PERFORMANCE MANAGEMENT<br />
A PUBLICATION OF THE SPAULDING GROUP, INC.<br />
Enhan<br />
master<br />
invest<br />
Delive n<br />
Maste C<br />
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ce your performance by<br />
ing the complexity of<br />
ment decision making<br />
sights | Use Experts<br />
omplexity | Incre<a title="JPM_Spring2019_23-3 page 1" href="http://viewer.zmags.com/publication/ac75bdab?page=1"> THE JOURNAL OF PERFORMANCE MEASUREMENT® THE PER</a>
<a title="JPM_Spring2019_23-3 page 2" href="http://viewer.zmags.com/publication/ac75bdab?page=2"> Enhan master invest Delive n Maste C rI r ce </a>
<a title="JPM_Spring2019_23-3 page 3" href="http://viewer.zmags.com/publication/ac75bdab?page=3"> The Journal of Performance Measurement </a>
<a title="JPM_Spring2019_23-3 page 4" href="http://viewer.zmags.com/publication/ac75bdab?page=4"> The Journal of Performance Measurement </a>
<a title="JPM_Spring2019_23-3 page 5" href="http://viewer.zmags.com/publication/ac75bdab?page=5"> MISSING: GIPS VERIFIER Red flags that you may have</a>
<a title="JPM_Spring2019_23-3 page 6" href="http://viewer.zmags.com/publication/ac75bdab?page=6"> Letter from the Editor At this year's PMA</a>
<a title="JPM_Spring2019_23-3 page 7" href="http://viewer.zmags.com/publication/ac75bdab?page=7"> The Journal of Performance Measurement’s® WOMEN </a>
<a title="JPM_Spring2019_23-3 page 8" href="http://viewer.zmags.com/publication/ac75bdab?page=8"> Letter from the Publisher I write this on t</a>
<a title="JPM_Spring2019_23-3 page 9" href="http://viewer.zmags.com/publication/ac75bdab?page=9"> Portfolio Management via a Holistic and Efficienc</a>
<a title="JPM_Spring2019_23-3 page 10" href="http://viewer.zmags.com/publication/ac75bdab?page=10"> Table 2: Correlation Matrix for Portfolio Assets </a>
<a title="JPM_Spring2019_23-3 page 11" href="http://viewer.zmags.com/publication/ac75bdab?page=11"> Figure 1: Asset Classes, Constrained and Unconstr</a>
<a title="JPM_Spring2019_23-3 page 12" href="http://viewer.zmags.com/publication/ac75bdab?page=12"> Table 3: Sample Unconstrained Asset Strategy for </a>
<a title="JPM_Spring2019_23-3 page 13" href="http://viewer.zmags.com/publication/ac75bdab?page=13"> Table 4: Diversified Asset Allocation for a Targe</a>
<a title="JPM_Spring2019_23-3 page 14" href="http://viewer.zmags.com/publication/ac75bdab?page=14"> Figure 3: Efficiency as Contribution to Return Mi</a>
<a title="JPM_Spring2019_23-3 page 15" href="http://viewer.zmags.com/publication/ac75bdab?page=15"> Figure 4: Fund Universe Across All Asset Classes </a>
<a title="JPM_Spring2019_23-3 page 16" href="http://viewer.zmags.com/publication/ac75bdab?page=16"> Table 5: Correlation of Alpha for Funds Used in O</a>
<a title="JPM_Spring2019_23-3 page 17" href="http://viewer.zmags.com/publication/ac75bdab?page=17"> Figure 5: Micro Efficiency of Active Portfolio </a>
<a title="JPM_Spring2019_23-3 page 18" href="http://viewer.zmags.com/publication/ac75bdab?page=18"> #4 funds – with poorer rewards for the active ris</a>
<a title="JPM_Spring2019_23-3 page 19" href="http://viewer.zmags.com/publication/ac75bdab?page=19"> Naïve (unintentional) alpha diversification of Hi</a>
<a title="JPM_Spring2019_23-3 page 20" href="http://viewer.zmags.com/publication/ac75bdab?page=20"> garding an active investment, such as a mutual fu</a>
<a title="JPM_Spring2019_23-3 page 21" href="http://viewer.zmags.com/publication/ac75bdab?page=21"> ing profession. The performance specialist plays</a>
<a title="JPM_Spring2019_23-3 page 22" href="http://viewer.zmags.com/publication/ac75bdab?page=22"> allocation and fund selection. Therefore, our </a>
<a title="JPM_Spring2019_23-3 page 23" href="http://viewer.zmags.com/publication/ac75bdab?page=23"> Figure 10: Visualizing Attribution of Active Deci</a>
<a title="JPM_Spring2019_23-3 page 24" href="http://viewer.zmags.com/publication/ac75bdab?page=24"> PEELING THE “ATTRIBUTION ONION” TO UN- COVER ADDI</a>
<a title="JPM_Spring2019_23-3 page 25" href="http://viewer.zmags.com/publication/ac75bdab?page=25"> Table 11: Drivers of “Alpha Efficiency” By conv</a>
<a title="JPM_Spring2019_23-3 page 26" href="http://viewer.zmags.com/publication/ac75bdab?page=26"> Table 12: Decomposition of Client Value the abil</a>
<a title="JPM_Spring2019_23-3 page 27" href="http://viewer.zmags.com/publication/ac75bdab?page=27"> When we examine the sources of portfolio efficien</a>
<a title="JPM_Spring2019_23-3 page 28" href="http://viewer.zmags.com/publication/ac75bdab?page=28"> How Best to Annualize Rates of Return Chances a</a>
<a title="JPM_Spring2019_23-3 page 29" href="http://viewer.zmags.com/publication/ac75bdab?page=29"> strate why we compound returns. You can see we h</a>
<a title="JPM_Spring2019_23-3 page 30" href="http://viewer.zmags.com/publication/ac75bdab?page=30"> THE BASICS OF CALCULATING ANNUALIZED RETURNS: WHE</a>
<a title="JPM_Spring2019_23-3 page 31" href="http://viewer.zmags.com/publication/ac75bdab?page=31"> This is what makes deriving the annualized return</a>
<a title="JPM_Spring2019_23-3 page 32" href="http://viewer.zmags.com/publication/ac75bdab?page=32"> to at least put these ideas out before the next l</a>
<a title="JPM_Spring2019_23-3 page 33" href="http://viewer.zmags.com/publication/ac75bdab?page=33"> Table 6: Four-Year Annualized Return Compar</a>
<a title="JPM_Spring2019_23-3 page 34" href="http://viewer.zmags.com/publication/ac75bdab?page=34"> have found several other examples that offer furt</a>
<a title="JPM_Spring2019_23-3 page 35" href="http://viewer.zmags.com/publication/ac75bdab?page=35"> ENDNOTES 1 See https://spauldinggrp.com/fun</a>
<a title="JPM_Spring2019_23-3 page 36" href="http://viewer.zmags.com/publication/ac75bdab?page=36"> The Journal Interview This year marks the 25th a</a>
<a title="JPM_Spring2019_23-3 page 37" href="http://viewer.zmags.com/publication/ac75bdab?page=37"> vestment advisors, plan sponsors and vendors of v</a>
<a title="JPM_Spring2019_23-3 page 38" href="http://viewer.zmags.com/publication/ac75bdab?page=38"> here to the different ways of deriving return and</a>
<a title="JPM_Spring2019_23-3 page 39" href="http://viewer.zmags.com/publication/ac75bdab?page=39"> the strategy can be very, very different from wha</a>
<a title="JPM_Spring2019_23-3 page 40" href="http://viewer.zmags.com/publication/ac75bdab?page=40"> were much more common than they are today. There </a>
<a title="JPM_Spring2019_23-3 page 41" href="http://viewer.zmags.com/publication/ac75bdab?page=41"> Multi-Period Contribution Analysis - Part 1 Text</a>
<a title="JPM_Spring2019_23-3 page 42" href="http://viewer.zmags.com/publication/ac75bdab?page=42"> Figure 1: Purchases Only, End of Day Cash Flows, </a>
<a title="JPM_Spring2019_23-3 page 43" href="http://viewer.zmags.com/publication/ac75bdab?page=43"> • Variances between TWRR vs. MWRR where flows </a>
<a title="JPM_Spring2019_23-3 page 44" href="http://viewer.zmags.com/publication/ac75bdab?page=44"> Figure 5 As at end day 4 Summary MWRR and TW</a>
<a title="JPM_Spring2019_23-3 page 45" href="http://viewer.zmags.com/publication/ac75bdab?page=45"> Figure 7 As at end day 4 Summary MWRR and TW</a>
<a title="JPM_Spring2019_23-3 page 46" href="http://viewer.zmags.com/publication/ac75bdab?page=46"> the geometric contribution would be 1.54% i.e., h</a>
<a title="JPM_Spring2019_23-3 page 47" href="http://viewer.zmags.com/publication/ac75bdab?page=47"> a fully weighted disposal transaction (Figure 9):</a>
<a title="JPM_Spring2019_23-3 page 48" href="http://viewer.zmags.com/publication/ac75bdab?page=48"> </a>
<a title="JPM_Spring2019_23-3 page 49" href="http://viewer.zmags.com/publication/ac75bdab?page=49"> Figure 12 (continued) Day 2 MV Start </a>
<a title="JPM_Spring2019_23-3 page 50" href="http://viewer.zmags.com/publication/ac75bdab?page=50"> CONCLUSION Reconciliation differences between th</a>
<a title="JPM_Spring2019_23-3 page 51" href="http://viewer.zmags.com/publication/ac75bdab?page=51"> High and Higher Accuracy Analytical Approximation</a>
<a title="JPM_Spring2019_23-3 page 52" href="http://viewer.zmags.com/publication/ac75bdab?page=52"> Chestopalov and Beliaev (2004) that uses a linear</a>
<a title="JPM_Spring2019_23-3 page 53" href="http://viewer.zmags.com/publication/ac75bdab?page=53"> for any n = 1, 2, … . It is clear that, given a</a>
<a title="JPM_Spring2019_23-3 page 54" href="http://viewer.zmags.com/publication/ac75bdab?page=54"> the formulas for calculating the x (the adjustmen</a>
<a title="JPM_Spring2019_23-3 page 55" href="http://viewer.zmags.com/publication/ac75bdab?page=55"> where t = T/2, that is where the cash flow occurr</a>
<a title="JPM_Spring2019_23-3 page 56" href="http://viewer.zmags.com/publication/ac75bdab?page=56"> 6.1. COMPARISON OF THE MODIFIED DIETZ AND RATIONA</a>
<a title="JPM_Spring2019_23-3 page 57" href="http://viewer.zmags.com/publication/ac75bdab?page=57"> applies to the examples given in the next paragra</a>
<a title="JPM_Spring2019_23-3 page 58" href="http://viewer.zmags.com/publication/ac75bdab?page=58"> a] = R[m/n, Rk –1[m/n, a]]. As we discussed above</a>
<a title="JPM_Spring2019_23-3 page 59" href="http://viewer.zmags.com/publication/ac75bdab?page=59"> mial and Rational rates improves as one increases</a>
<a title="JPM_Spring2019_23-3 page 60" href="http://viewer.zmags.com/publication/ac75bdab?page=60"> 3. HOW TO CALCULATE COEFFICIENTS OF A PADÉ APPROX</a>
<a title="JPM_Spring2019_23-3 page 61" href="http://viewer.zmags.com/publication/ac75bdab?page=61"> up to terms of the higher order. Proceeding to t</a>
<a title="JPM_Spring2019_23-3 page 62" href="http://viewer.zmags.com/publication/ac75bdab?page=62"> Global Asset Management and Performance Attributi</a>
<a title="JPM_Spring2019_23-3 page 63" href="http://viewer.zmags.com/publication/ac75bdab?page=63"> pensate for inflation and a premium to compensate</a>
<a title="JPM_Spring2019_23-3 page 64" href="http://viewer.zmags.com/publication/ac75bdab?page=64"> Financial Analysts, and AIMR, for their support a</a>
<a title="JPM_Spring2019_23-3 page 65" href="http://viewer.zmags.com/publication/ac75bdab?page=65"> the forward premiums and discounts that are impli</a>
<a title="JPM_Spring2019_23-3 page 66" href="http://viewer.zmags.com/publication/ac75bdab?page=66"> than the passive index. Which decision, market o</a>
<a title="JPM_Spring2019_23-3 page 67" href="http://viewer.zmags.com/publication/ac75bdab?page=67"> total portfolio return into components that are a</a>
<a title="JPM_Spring2019_23-3 page 68" href="http://viewer.zmags.com/publication/ac75bdab?page=68"> Figure 4: A Framework for Global Portfolio Return</a>
<a title="JPM_Spring2019_23-3 page 69" href="http://viewer.zmags.com/publication/ac75bdab?page=69"> Table 7: Summary of Calculations in Global Perfor</a>
<a title="JPM_Spring2019_23-3 page 70" href="http://viewer.zmags.com/publication/ac75bdab?page=70"> Table 7 (continued) Spring 2019 </a>
<a title="JPM_Spring2019_23-3 page 71" href="http://viewer.zmags.com/publication/ac75bdab?page=71"> Table 7 provides a summary of the detailed formul</a>
<a title="JPM_Spring2019_23-3 page 72" href="http://viewer.zmags.com/publication/ac75bdab?page=72"> Table 9: Summary of Global Portfolio Returns Tabl</a>
<a title="JPM_Spring2019_23-3 page 73" href="http://viewer.zmags.com/publication/ac75bdab?page=73"> The chosen portfolio strategy produced a total do</a>
<a title="JPM_Spring2019_23-3 page 74" href="http://viewer.zmags.com/publication/ac75bdab?page=74"> Table 11: Proposed Value-Added Performance Attrib</a>
<a title="JPM_Spring2019_23-3 page 75" href="http://viewer.zmags.com/publication/ac75bdab?page=75"> Hensel (1992). 12 The segmentati</a>
<a title="JPM_Spring2019_23-3 page 76" href="http://viewer.zmags.com/publication/ac75bdab?page=76"> The Journal of Performance Measurement Manuscript</a>
<a title="JPM_Spring2019_23-3 page 77" href="http://viewer.zmags.com/publication/ac75bdab?page=77"> On the Scene PMAR 2019 - Philadelphia 1. W</a>