Investment Performance & Risk Analysis

Course overview This course provides participants with comprehensive and detailed methods used in investment performance and risk analysis. Particular emphasis is placed on being able to handle special cases like derivatives or long/short portfolios. The program finally focuses on applications like performance appraisal, risk management and operating a performance measurement function in an organization. Attend this intensive and highly practical 3–day training course and learn the best practice techniques to: Calculate time-weighted and money-weighted returns Handle derivatives, short positions and perform security-level calculations Learn about performance measurement industry standards Conduct performance appraisals with benchmark and peer groups Analyse traditional and alternative investment portfolios with Brinson-style attribution methodologies Understand the peculiarities of fixed income attribution models Attribute currency effects for international portfolios, portfolios with currency overlay managers and strategic currency hedging Turn your attribution models into hybrid models by integrating results from factor models Use style analysis to attribute performance when no constituent data is available Learn about the latest risk indicators capturing tail risk, non-normal risks, tail risk and non-linear dependence Calculate risk attribution consistent with your performance attribution PLUS: Enhance your practical skills with spreadsheet example calculations for all quantitative methods discussed Methodology The training consists of classroom-based teaching combined with selected exercises and spreadsheet-based example calculations. Delegates will be given a pre-course questionnaire prior to attendance to submit specific questions or case studies that will be addressed during the course. All delegates should bring their calculators to facilitate in-class studies and exercises. Take-away Delegates will receive all spreadsheets used during the course Who Should Attend Investment analysts Asset managers and traders Mid-office personnel System developers Risk managers Reporting specialists Institutional investors The course assumes a general familiarity with financial markets, instruments and investment portfolios. Whilst not based upon a theoretical or pure mathematical approach, a basic understanding of statistical and mathematical concepts is an advantage. Supporting publication:
Day 1 Portfolio accounting basics Basic relationships between ending and beginning market values Selected issues: treatment of transaction costs, the net-of-fee and gross-of-fee perspectives and trade date versus value date Currency aspects: exchange rates, position and portfolio currencies Simple returns Why percentage returns? Calculation of simple returns Aggregating returns overt time Aggregating returns across portfolios with weighting schemes Single-period and multi-period returns (chain-linking) Average returns: arithmetic and geometric averages Returns with contributions The impact of contributions and withdrawals to capital invested Money-Weighted Return International Rate of Return Approximations Time-Weighted Return True TWR Dietz and Modified Dietz approximations Unit-value method and related methods The relationship between MWR and TWR Selected topics in applied return measurement Position-level return calculations Aggregating portfolio returns Derivatives: Future and options, swaps, currency forwards Leverage and investment returns Return of short positions Investment return reporting and presentation Reporting investment performance Internal clients External clients Behavioral finance aspects Regulations: MiFiD and more Industry standards Some history GIPS Other standards Day 2 Performance Attribution Basics Return contributions: calculation, the impact of transactions, chain-linking contributions Active return: arithmetic and geometric The difference between contribution to attribution analysis Active investment management decisions Attributing time-weighted and money-weighted returns Introduction to Brinson attribution Deriving the Brinson decomposition Interpretation of the Interaction effect Allocation with a hurdle rate (Brinson/Fachler) Multi-period attribution: Available alternatives, cumulative attribution effects Handling portfolio and benchmark investment universe mismatches Evaluating hierarchical investment decisions Evaluating non-hierarchical investment decisions Is there really a selection effect? Reconciling Brinson with Markowitz and making sense of the debate about the relative importance of allocation and selection Evaluating pure selection decisions Conditional attribution effects Advanced Brinson attribution Long/short attribution Multi-Manager attribution International portfolios Spot currency effects Expected and unexpected currency return components Currency hedging Karnosky/Singer attribution Factor attribution and style analysis Introduction to factor models Multi-factor attribution Style attribution Hybrid models Day 3 Fixed income attribution Bond valuation basics Introduction to the yield curve Fixed income return components Modeling duration Brinson-style fixed income attribution (van Breukkelen) Commercial fixed income attribution models Risk attribution Introduction to measuring investment risk Dispersion-based risk: Volatility and Tracking Error Loss-based risk measures: VaR and Drawdown Volatility and tracking error decomposition Tail risk attribution Contributions from non-normality Contributions from excess kurtosis and skewness Risk analysis before the trade: trade-risk profiles Risk-adjusted performance and its attribution The link between risk and return Traditional risk-adjusted measures Sharpe and Information ratio, M2 Treynor ratio, Alpha Alternative measures Sortino, modified Sharpe ratios Omega, Ulcer Index, Farinelli/Tibiletti Ratio, Generalized Rachev Ratio Sterling Ratio, Calmar Ratio, Burke Ratio Risk-adjusted performance attribution: the Ankrim decomposition Introduction to decompositions of Information and Sharpe ratios Participant-submitted case studies and exercises Performance appraisal The importance of appraisal For investors For investment managers Other stakeholders Benchmarking: Characteristics of good benchmarks Peer group analysis and potential biases Behavioral Finance aspects Performance measurement in an investment management organization