Investment Management Tutorial Unit 2

Investment Management Tutorial Unit 2Implementing and monitoring

11 September 2007

Simon Eagleton, [email protected]

Mercer Investment Consulting 2J:\Consulting\Team\Simon\Institute of Actuaries\IMtutorial_2007_unit2.ppt

Performance based analysis

Can be used as a screen to narrow down large manager universes.

Typical Performance measures– Absolute return

– Excess return

Typical Risk Measures– Standard Deviation (SD)

– Tracking Error (TE)

– Value at Risk (VaR)

– Drawdown

– “Hit rate” and other consistency measures

Risk Adjusted Performance Measures– Information Ratio (IR)

– Sharpe Ratio

– Sortino Ratio


Performance Based Analysis – cont’d

Performance Surveys

•Mercer

•Intech

•Russell

•Morningstar

•etc

A u s tra lia n S h a re s S p e c ia lis t - A c tiveR e tu rn s fo r p e r io d s e n d e d 3 0 J u n e 2 0 0 5

M a n a g e r/F u n d F u n d F u n d 3 M o n th s 1 Y e a r 2 Y e a rs 3 Y e a rs 5 Y e a rsS iz e T yp e (% ) R a n k (% ) R a n k (% p a ) R a n k (% p a ) R a n k (% p a ) R a n k

A B N A M R O A u s t E q u ity M S 7 .1 (2 ) 3 4 .4 (6 ) 2 8 .5 (9 ) 1 7 .2 (1 0 ) n aA M P C a p ita l A c tiv e Q u a n t L U C 4 .7 (4 4 ) 2 8 .2 (4 0 ) 2 5 .6 (2 3 ) 1 5 .6 (2 5 ) 1 0 .6 (2 6 )A M P C a p ita l C a p ita l A p p ro a c h L U C 5 .0 (3 3 ) 2 9 .0 (3 1 ) 2 5 .7 (2 1 ) 1 5 .3 (3 2 ) 9 .5 (3 6 )A M P C a p ita l V a lu e P lu s L U C 2 .7 (7 3 ) 2 8 .1 (4 1 ) 2 7 .7 (1 2 ) 1 8 .2 (6 ) n aA N Z A u s t S h a re s L U C 5 .1 (3 1 ) 3 1 .1 (1 5 ) 2 5 .2 (3 1 ) 1 5 .3 (3 2 ) 9 .0 (4 0 )A b e rd e e n A u s t E q u ity M S 3 .5 (6 7 ) 2 2 .1 (6 8 ) 2 1 .4 (6 1 ) 1 4 .7 (4 8 ) 9 .7 (3 5 )A lle ro n G ro w th S U C 4 .3 (5 5 ) n a n a n a n aA llia n c e A u s t E q u ity L A C 5 .5 (1 9 ) 2 9 .9 (2 2 ) 2 5 .5 (2 5 ) 1 4 .7 (4 8 ) 7 .9 (4 4 )A lp h a In v e s tm e n t M a n a g e m e n t L A C 4 .1 (5 8 ) 2 5 .8 (5 8 ) 2 2 .8 (5 8 ) 1 5 .1 (4 0 ) 1 1 .7 (1 5 )A u s b il A u s t A c tive E q u ity L A C 3 .9 (6 4 ) 3 4 .7 (5 ) 3 2 .3 (1 ) 1 9 .4 (2 ) 1 3 .6 (8 )B G I A u s t A lp h a E q u ity L U C 4 .6 (5 0 ) 2 7 .2 (5 0 ) 2 4 .2 (4 9 ) 1 5 .9 (2 0 ) 1 1 .7 (1 5 )B T In s titu tio n a l C o re A u s t S h a re M S 5 .6 (1 7 ) 2 9 .3 (2 7 ) 2 8 .2 (1 0 ) 1 7 .0 (1 1 ) 1 0 .2 (2 9 )B T In s titu tio n a l Im p u ta tio n S e c to r T ru s t M S 5 .1 (3 1 ) 3 1 .3 (1 4 ) 3 0 .1 (4 ) 1 8 .8 (5 ) n aB e rn s te in V a lu e L S 5 .4 (2 1 ) 3 3 .4 (7 ) 2 9 .2 (7 ) n a n aC F S W 's a le A u s t S h a re L S 4 .8 (4 2 ) 3 0 .1 (2 0 ) 2 3 .9 (5 3 ) 1 5 .3 (3 2 ) 9 .5 (3 6 )C F S W 's a le A u s t S h a re F u n d - C o re L S 5 .3 (2 2 ) 2 9 .4 (2 5 ) 2 5 .5 (2 5 ) 1 5 .2 (3 7 ) 1 1 .2 (2 1 )C F S W 's a le Im p u ta tio n L S 5 .3 (2 2 ) 2 8 .9 (3 2 ) 2 2 .7 (5 9 ) n a n aC F S W 's a le L o w T ra c k in g E rro r - C o re L S 4 .9 (3 7 ) 2 7 .7 (4 6 ) 2 4 .3 (4 6 ) 1 4 .7 (4 8 ) 9 .8 (3 2 )C S A M A u s t S h a re s L S 5 .0 (3 3 ) 2 4 .1 (6 3 ) 1 9 .7 (6 4 ) 1 0 .1 (5 8 ) 4 .3 (4 6 )C h a lle n g e r A u s t E q u it ie s C o m p o s ite L U C 6 .0 (1 0 ) 2 8 .9 (3 2 ) 2 3 .9 (5 3 ) 1 6 .3 (1 8 ) 1 3 .9 (6 )C h a lle n g e r S e le c t A u s tra lia n S h a re s M 3 .3 (6 8 ) n a n a n a n aC itig ro u p E q u ity M o d e l C o m p o s ite L A C 5 .0 (3 3 ) 2 4 .6 (6 2 ) 2 2 .5 (6 0 ) 1 5 .4 (3 0 ) 1 1 .3 (1 9 )C o n c o rd C a p ita l A u s t E q u it ie s C o m p L A C 3 .9 (6 4 ) 2 8 .0 (4 2 ) 2 5 .1 (3 4 ) 1 5 .9 (2 0 ) 1 2 .0 (1 3 )C o n s te lla tio n C a p ita l M a n a g e m e n t L I 2 .8 (7 2 ) 2 2 .3 (6 7 ) 2 4 .3 (4 6 ) 1 6 .5 (1 7 ) n aC o n ta n g o A u s t E q u ity L I 5 .2 (2 8 ) 3 1 .8 (1 0 ) 2 5 .5 (2 5 ) 1 4 .9 (4 4 ) 9 .8 (3 2 )D e u ts c h e A u s t E q u ity A lp h a C o m p o s ite L A C 4 .4 (5 4 ) 2 9 .3 (2 7 ) 2 5 .5 (2 5 ) 1 5 .1 (4 0 ) 9 .2 (3 8 )D e u ts c h e A u s t E q u ity C o re C o m p o s ite L A C 5 .3 (2 2 ) 2 9 .1 (3 0 ) 2 4 .9 (3 7 ) 1 5 .3 (3 2 ) 9 .8 (3 2 )D im e n s io n a l A u s t V a lu e L S 1 .7 (7 7 ) 2 5 .8 (5 8 ) 2 9 .7 (5 ) 1 9 .8 (1 ) 1 8 .3 (2 )D re s d n e r R C M A u s t E q u ity C o m p o s ite M U C 5 .2 (2 8 ) 2 6 .6 (5 6 ) 2 3 .2 (5 7 ) n a n aF id u c ia n A u s tra lia n S h a re s F u n d M S 4 .0 (6 1 ) 2 5 .0 (6 0 ) 2 4 .1 (5 0 ) 1 5 .5 (2 8 ) 1 1 .2 (2 1 )G M O A u s t E q u ity M o m e n tu m M S 5 .3 (2 2 ) 3 2 .9 (8 ) 2 7 .4 (1 3 ) n a n aG M O A u s t E q u ity T ru s t L U C 4 .7 (4 4 ) 2 7 .3 (4 9 ) 2 3 .3 (5 6 ) 1 6 .2 (1 9 ) 1 3 .7 (7 )G o ld m a n S a c h s J B W e re A s s e t M G T L P 6 .1 (8 ) 3 2 .1 (9 ) 2 6 .6 (1 6 ) 1 5 .8 (2 2 ) 1 1 .3 (1 9 )H S B C A u s t E q u ity C o m p o s ite (S p e c ia lis t) L U C 6 .0 (1 0 ) 2 6 .3 (5 7 ) 2 5 .0 (3 5 ) 1 4 .8 (4 7 ) 9 .1 (3 9 )H S B C P re m ie r A c tive A u s t E q u ity M S 6 .0 (1 0 ) 2 7 .1 (5 2 ) 2 5 .7 (2 1 ) 1 4 .7 (4 8 ) 1 0 .8 (2 4 )H y p e rio n A u s tra lia n G ro w th S I 3 .8 (6 6 ) 3 1 .4 (1 3 ) 2 4 .8 (3 8 ) 1 1 .5 (5 7 ) n aIA G A M A u s tra lia n S h a re s - C o re L I 5 .8 (1 6 ) 2 9 .4 (2 5 ) n a n a n aIA G A M R e s e a rc h F u n d L I 7 .1 (2 ) 3 7 .9 (1 ) n a n a n aIN G A u s t S h a re s C o m p o s ite L A C 5 .3 (2 2 ) 3 1 .5 (1 2 ) 2 5 .9 (1 9 ) 1 5 .6 (2 5 ) 1 1 .6 (1 7 )IN G S e le c t L e a d e rs M S 4 .9 (3 7 ) 3 5 .0 (4 ) n a n a n aIN V E S C O A u s t S h a re s C o m p o s ite L A C 4 .9 (3 7 ) 3 0 .2 (1 9 ) 2 9 .3 (6 ) 1 8 .1 (8 ) 1 2 .2 (1 1 )In d e p e n d e n t A s s e t M a n a g e m e n t M I 3 .1 (6 9 ) 3 0 .5 (1 6 ) 2 8 .6 (8 ) n a n aIn v e s to rs M u tu a l L S 3 .0 (7 0 ) 2 1 .4 (6 9 ) 2 1 .4 (6 1 ) 1 5 .1 (4 0 ) 1 5 .2 (5 )J F C a p ita l P a rtn e rs L U C 4 .7 (4 4 ) 3 0 .5 (1 6 ) 2 8 .1 (1 1 ) 1 5 .8 (2 2 ) 7 .6 (4 5 )

S u rve y c o n tin u e s o n th e n e x t p a g e ...W e s tA M A u s t E q u ity T ru s t M S 5 .3 (2 2 ) 2 8 .9 (3 2 ) 2 4 .6 (4 1 ) 1 6 .7 (1 6 ) n aW e s tp e a k A u s t E q u ity S tra te g y M U C 4 .5 (5 1 ) 2 0 .7 (7 0 ) 2 1 .0 (6 3 ) 1 3 .8 (5 5 ) 8 .9 (4 1 )N u m b e r o f F u n d s 7 7 7 2 6 4 5 8 4 6U p p e r Q u a rtile 5 .5 3 0 .2 2 6 .6 1 6 .9 1 2 .1M e d ia n 4 .9 2 8 .7 2 5 .2 1 5 .4 1 1 .0L o w e r Q u a rtile 4 .1 2 6 .9 2 4 .2 1 4 .9 9 .7

S & P /A S X 3 0 0 (A ll O rd s b e fo re 1 /4 /2 0 0 0 ) 4 .7 (4 4 ) 2 6 .0 (5 8 ) 2 3 .9 (5 3 ) 1 4 .7 (4 8 ) 9 .5 (3 6 )S & P /A S X 1 0 0 L e a d e rs 5 .0 (3 3 ) 2 5 .9 (5 8 ) 2 3 .7 (5 6 ) 1 4 .4 (5 3 ) 9 .5 (3 6 )S & P /A S X 2 0 0 (A ll O rd s b e fo re 1 /4 /2 0 0 0 ) 5 .0 (3 3 ) 2 6 .4 (5 7 ) 2 4 .0 (5 3 ) 1 4 .7 (4 8 ) 9 .4 (3 8 )

C O P Y R IG H T 1 A u g 2 0 0 5A ll ra te s o f re tu rn a re b e fo re ta x a n d b e fo re m a n a g e m e n t fe e s . R a te s o f re tu rn a re a n n u a lis e d fo r p e rio d s e xc e e d in g o n e y e a r.F u n d S iz e C o d e s : "S " = S m a ll (< $ 2 0 m ) "M " = M e d iu m ($ 2 0 -$ 2 0 0 m ) "L " = L a rg e (> $ 2 0 0 m )F u n d T yp e C o d e s : "S "= s e c to r p o o l "P "= c o m p o n e n t o f d ive rs if ie d p o o le d fu n d "A C /U C "= a u d ite d /u n a u d ite d c o m p o s ite " I"= in d iv id u a l a c c o u n t "R "= re ta il p ro d u c t


Performance Based Analysis – cont’dComparison with the Mercer Overseas Shares Universe

Annualised Tracking Error and Excess Return for 5 years ended June 2007(before tax and before fees) - - - - Median

7.5

5.5

3.5ExcessReturn(% pa)

1.5

-0.5

-2.5

-4.5

-6.5

0.0 2.0 4.0 6.0 8.0 10.0Annualised Tracking Error vs MSWXAUNAUD (% pa) calculated monthly


Performance based analysis - cont’d

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Apr 1999 Dec 1999 Aug 2000 Apr 2001 Dec 2001 Aug 2002 Apr 2003 Dec 2003 Aug 2004 Apr 2005 Dec 2005 Aug 2006 Apr 2007

Mon

thly

Exc

ess

Ret

urn

(%)

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Excess R

eturn (%)

Rising Markets Falling Markets 12 Month Rolling Excess Return

Excess Return in Overseas Shares from Apr 1999 to Jul 2007BGIA versus MSWXAUNAUD (before tax and before fees)

BGI International Alpha Equity Fund



Performance AnalyticsOverseas Shares (all funds) Monthly Returns - before tax and before feesfor the 100 Month period from Mar 1999 to Jun 2007

Manager Returns Standard Reward Semi Standard Deviation Tracking Information T-score Confidence

Total Annual Excess Deviation to Risk against mean against zero Error Ratio on IR of Value

(%) (%pa) (%pa) (%pa) Ratio (% per mth) (% per mth) (%pa) Added (%)

NAS 124.8 10.2 8.6 19.7 0.5 3.5 3.0 13.4 0.6 2.0 98

BGIA 30.9 3.3 1.6 11.8 0.3 2.5 2.3 1.0 1.6 4.3 100

BERV 111.3 9.4 7.8 12.3 0.8 2.7 2.3 8.1 1.0 2.6 100

Benchmark:

MSWXAUNAUD 14.5 1.6 12.0 0.1 2.6 2.5

Upper Quartile 63.9 6.1 4.5 12.7 0.5 2.7 2.5 6.0 1.1 3.0 100

Median 42.6 4.4 2.7 12.0 0.3 2.6 2.4 4.5 0.9 2.4 99

Lower Quartile 22.1 2.4 0.8 11.4 0.2 2.4 2.2 3.0 0.4 1.1 87



Performance AnalyticsOverseas Shares (all funds) Monthly Returns - before tax and before feesfor the 100 Month period from Mar 1999 to Jun 2007

Manager Distribution of Regression Analysis: y = a + b * index

Excess Returns Alpha (a) Beta (b) R-squared Correlation T-score Confidence of

Skewness Kurtosis (% pa) (%) Alpha<>0 Value Added (%)

NAS 1.9 9.1 9.1 1.22 55 0.74 1.9 97

BGIA 0.2 -0.2 1.6 0.98 99 1.00 4.6 100

BERV 0.0 2.2 8.2 0.80 61 0.78 2.9 100

Benchmark:

MSWXAUNAUD

Upper Quartile 1.0 5.0 4.7 1.01 94 0.97 3.4 100

Median 0.3 2.6 2.7 0.98 88 0.94 2.5 99

Lower Quartile -0.2 1.7 1.1 0.84 77 0.88 1.3 90


Performance based analysis - cont’dOverseas Shares Style Analysis

51

11

20

5

37

44

1

80

51

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

BGIA BERV NAS

7 Years ending June 2007

% o

f Tot

al SPCPMIWXAUV

SPCPMIWXAUG

SPCEMIWXAUV

SPCEMIWXAUG


Performance based analysis – con’td

Persistence - Does historic performance predict the future?

Many studies have been carried out:– Some have found that past performance has no predictive power

whatsoever

– Others have found a modest degree of predictive power

– Lots of research, but still no definitive answer

Why the conflicting conclusions?– Different time periods

– Different asset classes

– Different data sources

– Different past performance measures being tested


Performance based analysis – cont’d

Problems with performance based analysis

Individuals change

Teams change

Processes evolve

Markets evolve

Funds under management change

Hard to discern between skill and luck

Be aware of survivor bias and incubation bias in data


Performance based analysis – cont’d

Part 1 Results: Australian Equity

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

0 1 2 3 4 5 6 7 8 9

Length of Track Record (Years)

Ave

rag

e R

elat

ive

Per

form

ance

O

ver

Fo

llo

win

g T

hre

e Y

ears

(%

pa)

Length of track record is a negative predictor of future performance.

Part 1 Results: Global Equity

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

0 1 2 3 4 5 6 7 8 9 10 11 12

Length of Track Record (Years)

Ave

rag

e R

elat

ive

Per

form

ance

O

ver

Fo

llo

win

g T

hre

e Y

ears

(%

pa)


Identifying future outperformers Researching managers

15,000+ strategies monitored

1400+ strategies rated ‘A’ or ‘A-’

4,000+ strategies rated

Idea generationHow strong is the manager’s ability to generate value-adding investment ideas?

Portfolio constructionHow effectively are these investment ideas translated into weightings within portfolios?

ImplementationHow much of the value added is given back in the form of transaction costs and opportunity costs?

Business managementWell managed investment firms are more likely to maintain and enhance the competitiveness of their investment strategies over time.


Holdings-Based Analysis

Generally used for risk analysis, style classification or both

Providers– Barra

– Style Research Associates

– Goldman Sachs

– Northfield

– Risk Metrics

– APT

– Others…


Holdings based analysis – cont’d

1.6

-0.1

1.91.5

3.7

1.9

1.00.7

-0.4

2.3

-2.0

0.8 0.7

1.7

2.6

1.8

-1.4 -1.6

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Sty

le T

ilt™

Style Factors

Portfolio Style Skyline™


Global (All-caps)Rolling 5yr Quality Signals

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

May-92 May-93 May-94 May-95 May-96 May-97 May-98 May-99 May-00 May-01 May-02 May-03 May-04 May-05 May-06 May-07

Sustainable Growth ROE Debt to EquityEarnings Growth Stability Poly. (ROE) Poly. (Earnings Growth Stability)Poly. (Sustainable Growth)

Global Equities (all-cap)Rolling 1 Year Excess Returns of SRA Quality Factors

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

May-87

May-88

May-89

May-90

May-91

May-92

May-93

May-94

May-95

May-96

May-97

May-98

May-99

May-00

May-01

May-02

May-03

May-04

May-05

May-06

May-07

ROE Debt to Equity Earnings Growth Stability Sustainable Growth

Factor analysis

“Quality” factors– A strong indicator of returns through the cycle

– Surprisingly weak in recent periods


Value and Quality

Contrarian Value

Value and (lots of) Momentum

Yield- focused Value

-7.0

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

Boo

k to

Pric

e

Div

iden

d Y

ield

C'F

low

Yie

ld

Sal

es to

Pric

e

IBE

S E

ngs

Yld

Ear

ning

s G

row

th

Sal

es G

row

th

IBE

S 1

2Mth

Gr

IBE

S E

ngs

LTG

Sus

tain

able

Grt

h

Rtn

on

Equ

ity

Low

Gea

ring

Ear

ning

s G

r S

tab

Mar

ket C

ap

Mar

ket B

eta

Mom

entu

m S

T

Mom

entu

m M

T

IBE

S 1

Yr

Rev

Sty

le T

ilt™

'Value' Factors 'Growth' Factors Other Style Factors

Mar 2007 vs Historical Tilt Range - Mar 2004 to Mar 2007 (12)ARROWST - Global Equity Strategy

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Boo

k to

Pric

e

Div

iden

d Y

ield

C'F

low

Yie

ld

Sal

es to

Pric

e

IBE

S E

ngs

Yld

Ear

ning

s G

row

th

Sal

es G

row

th

IBE

S 1

2Mth

Gr

IBE

S E

ngs

LTG

Sus

tain

able

Grt

h

Rtn

on

Equ

ity

Low

Gea

ring

Ear

ning

s G

r S

tab

Mar

ket C

ap

Mar

ket B

eta

Mom

entu

m S

T

Mom

entu

m M

T

IBE

S 1

Yr

Rev

Sty

le T

ilt™


Mar 2007 vs Historical Tilt Range - Jun 2005 to Mar 2007 (4)EDINPTNR - Focus

Contrarian Value

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Boo

k to

Pric

e

Div

iden

d Y

ield

C'F

low

Yie

ld

Sal

es to

Pric

e

IBE

S E

ngs

Yld

Ear

ning

s G

row

th

Sal

es G

row

th

IBE

S 1

2Mth

Gr

IBE

S E

ngs

LTG

Sus

tain

able

Grt

h

Rtn

on

Equ

ity

Low

Gea

ring

Ear

ning

s G

r S

tab

Mar

ket C

ap

Mar

ket B

eta

Mom

entu

m S

T

Mom

entu

m M

T

IBE

S 1

Yr

Rev

Sty

le T

ilt™


Mar 2007 vs Historical Tilt Range - Jun 2006 to Jun 2007 (5)PZENA - Pzena Global Value Strategy

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Boo

k to

Pric

e

Div

iden

d Y

ield

C'F

low

Yie

ld

Sal

es to

Pric

e

IBE

S E

ngs

Yld

Ear

ning

s G

row

th

Sal

es G

row

th

IBE

S 1

2Mth

Gr

IBE

S E

ngs

LTG

Sus

tain

able

Grt

h

Rtn

on

Equ

ity

Low

Gea

ring

Ear

ning

s G

r S

tab

Mar

ket C

ap

Mar

ket B

eta

Mom

entu

m S

T

Mom

entu

m M

T

IBE

S 1

Yr

Rev

Sty

le T

ilt™


Mar 2007 vs Historical Tilt Range - Jun 2001 to Mar 2007 (12)DIA - Global Value Equity

Manager selection – diversity of Alpha


Portfolio analytics: example portfolio

Risk Feature % pa

Tracking Error (TE)

0.9

Components of TE

- Market Risk * 0.1

- Sector Risk * 0.1

- Style Risk * 0.1

- Equity Risk * 0.3* Refer to Appendix A for definitions of each risk component.

Note: Components do not sum to total due to interactive effects.

Style and Risk Characteristics:

(8 managers covering 1453 of 2655 stocks)

International Shares Manager Mix as at 31 Mar 2007

1.0

-0.7

2.1

1.4

3.6

1.1 1.1

-1.0 -1.1

1.2

-0.7

1.2

-1.0

0.1

1.61.2

-0.5 -0.4

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Book t

o Pric

e

Divide

nd Y

ield

C'Flow

Yie

ld

Sales t

o Pric

e

IBES E

ngs

Yld

Earni

ngs G

rowth

Sales G

rowth

IBES 1

2Mth

Gr

IBES E

ngs

LTG

Susta

inable

Gro

wth

Mar

ket C

ap

Mar

ket B

eta

Mom

entu

m S

T

Mom

entu

m M

T

IBES 1

Yr Rev

Rtn o

n Equ

ity

Low G

earin

g

Earni

ngs G

r Sta

bility

Style Factors

Sty

le T

ilt™

Could increase this significantly with a different

manager line-up


Portfolio analytics

Manager correlations and risk characteristics:Cont.To TV

Fund Weight TE % Volatility BetaFund of Funds - 0.86 - 11.55 1.00Alliance Capital 16.00 2.34 9.55 11.98 1.02GMO Global 15.00 1.84 9.68 11.38 0.97Bernstein Global Value 15.00 2.33 23.51 11.84 1.00BGI International 20.00 1.28 9.56 11.62 1.00Credit Suisse International 19.00 2.67 29.05 11.62 0.98Lazard Emerging Markets 3.00 10.42 1.78 17.02 1.18MBA Asian Investment 2.00 9.69 4.83 14.40 0.92MFS Global Equity 10.00 2.90 12.04 11.67 0.98

Fund of Funds Alliance Capital GMO Global Bernstein Global BGI International Credit Suisse Lazard Emerging MBA Asian MFS Global Fund of Funds 1.00Alliance Capital 0.22 1.00GMO Global 0.30 -0.16 1.00Bernstein Global Value 0.57 -0.21 0.26 1.00BGI International 0.32 -0.02 0.39 0.16 1.00Credit Suisse International 0.49 -0.11 -0.16 0.07 0.07 1.00Lazard Emerging Markets 0.05 0.03 -0.43 0.09 -0.55 -0.10 1.00MBA Asian Investment 0.21 -0.07 -0.28 0.09 -0.36 0.06 0.52 1.00MFS Global Equity 0.36 -0.02 0.40 0.09 0.24 -0.07 -0.37 -0.13 1.00

Relatively high

Large proportion of the risk budget


Rolling Three Year Excess Return of Global Equity Managers from GIMD (US$)

Grouped by TE Quartile

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

(%)

Top Quartile

2nd Quartile

3rd Quartile

4th Quartile

Manager selection – active risk level


These slides contain confidential and proprietary information of Mercer Investment Consulting, a division of Mercer Human Resource Consulting Pty Ltd (‘Mercer’). These slides, and any opinions on investment products they contain are for your exclusive use and may not be used or modified by any other person or sold or otherwise provided, in whole or in part, to any other person or entity without Mercer’s prior written permission.

Information on investment management firms contained in these slides has been obtained from the firms themselves and other sources. While this information is believed to be reliable, no representations or warranties are made as to the accuracy of the information presented, and no responsibility or liability, including for consequential or incidental damages, is accepted for any error, omission or inaccuracy in this presentation or related materials.

Opinions on investment products contained in these slides are not a guarantee as to the future investment performance of these products. In addition, past performance cannot be relied on as a guide to future performance.

Date post:	12-Jun-2015
Category:	Documents
Upload:	khanyasmin
View:	888 times
Download:	0 times

Investment Management Tutorial Unit 2

Documents