The Investment Decision Processes (IDP) of asset managers can have very diverse structures. They range from multi-level and top-down hierarchical structures to bottom-up stock picking. Another structure, mostly used by mutual funds, is a 'two-layer' concatenation of funds, which we usually refer to as 'fund of funds'. Mutual funds keep track of how each individual fund is performing and they want to aggregate this into one concise overview.
Whether the investment process consists of only one or more than ten layers, asset managers need to measure the contribution of each investment decision to the overall performance. Using performance attribution techniques you can reveal which decisions consistently add value on a risk-adjusted basis. In other words, performance evaluation makes it possible to identify the strengths and weaknesses of the investment organisation; the first step in managing performance. It is therefore no surprise that performance evaluation has gained considerable attention over the last decade, as is evident from the development and global acceptance of performance standards (GIPS).
To support asset managers in measuring, reporting and evaluating their performance, we have developed PEARL. This performance evaluation solution enables you to evaluate the risk/return of each investment decision taken, regardless of the complexity of your investment decision process. PEARL not only supports stock picking, sector allocation processes and much more complex structures in balanced accounts, but it is also capable of processing large numbers of diverse clients in a limited time-period.
You can also benefit from our experience in performance evaluation by hiring one of our consultants or by attending the ORTEC Academy training courses.