Performance Assessment

It is imperative that portfolio managers’ performance be periodically assessed.  This is necessary to determine whether to make management changes if the portfolio is failing to meet its goals and/or the money managers are not performing in line with their peers.

Performance is measured by calculating the return for portfolios over a specified period of time.  Performance evaluation explores whether the manager outperformed the set benchmark (also known as the standard) and how the manager achieved portfolio returns.


Three single-index methods calculate money managers’ performance:

Treynor Index:

  • Measures extra return per unit of risk.

Sharpe Index:

  • Measures extra return in relation to variability.

Jensen Index:

  • Utilizes a special asset pricing model.

Return attribution analysis is the method used to figure out the decisions made by the manager that led to the returns achieved.

Fixed Income Best Practices