A detailed analysis of investment performance is part of every modern client report. The capabilities of modern systems allow us to slice and dice performance according to investment periods, asset classes, or any other way imaginable. Even more resource-intensive calculation methods like True Time Weighted Return (TTWR) are taken for granted nowadays. In the Global Investment Performance Standards (GIPS), the financial community has found a common denominator for its calculation methods and presentation requirements. Nevertheless, the main challenge remains the tailoring of reports to the recipient’s needs and to his ability to understand.
First and foremost in a private banking environment, performance reports must be understandable. However well intentioned, the inclusion of subtleties such as the correct interpretation of late market prices or granular differentiation of net and gross levels tends to foster skepticism and mistrust more than clarification and understanding. Private banking clients require above all a clear explanation as to how overall performance results were shaped by the individual gains and losses of the portfolio components.
On the other hand, institutional clients have a good understanding of the differences between the accounting view of position statements and the economic view of performance reports. For some, it would seem that performance analysis will never be detailed enough. And as much as one might like to please such large clients, the problem remains that complex performance attribution methods go beyond the kind of functionality that can be tested with reasonable effort. To cope with data requirements of modern analysis methods, companies increasingly consider outsourcing their performance calculation and analysis to specialists.
- Assessment of client requirements as well as technical and procedural feasibility
- Evaluation of performance calculation systems and support of architectural decisions
- Rollout and testing of performance reporting systems and performance reports