Performance Relative to Risk

Besides checking on a manager’s returns, we also scrutinize how much risk was taken to realize those returns. Four statistical terms calculate a manager’s risk/risk-adjusted return:

		Standard deviation: Return variation versus median return
		Alpha: Calculates a manager’s return above the market’s return
		Beta: Assesses the volatility of returns versus a market index
		Sharpe ratio: Calculates return (adjusted for the risk taken) against a benchmark

Performance Among Peers

Keeping in mind that asset diversification is the important element leading to the success of your investments, one way that we identify managers who concentrate on the various asset classes, both broad and subasset, is by researching peer/style groups. By doing this we have the ability to rate money managers according to everyone else in their peer/style group, so we can get a sense of all their accomplishments.

Performance in Rising/Falling Markets

We study money managers’ quarterly returns, which is the best way to figure out what they can do in terms of making successful investments for you. We also want you to keep in mind that while your portfolio can take great growth strides in a rising market, a falling market offers more challenges. You must be prepared for the unavoidable dips in value that happen periodically with the market. That is why it is a good idea to also review a money manager’s performance in a plummeting market as well as one that is sky-rocketing. And to look at relative and absolute performances, plus the asset mix, too.

Performance of Important Decision Makers and Their Companies

The decisions made by key personnel at investment companies also factor highly into the overall results for investment plans. Their judgements and examinations of the market, various assets, plan results, and a multitude of other information can make all the difference in the returns for an assortment of investment strategies.

Money Manager Selection: Due Diligence Process
Performance numbers	Time weighted, listed quarterly, combination of real portfolios, 3rd-party verification, inclusive of net/gross fees
Performance relative to risk	Standard deviation: return variation vs. median return Alpha: Calculates a manager’s return above the market’s return Beta: calculates the volatility of returns vs. a market index Sharpe ratio: assesses return against a benchmark
Performance among peers	Independent evaluations, performance over time
Performance in rising/falling markets	Strategies and sell performances
Performance of important decision makers & their companies	What kinds of decisions and strategies are key personnel making?