Category: Performance Attribution
-
Linked performance attribution illustration available
I’ve added a workbook that illustrates how active effects contribute to a fund’s cumulative performance over time. If you think that topic’s a cure for insomnia, get in line. This was the topic of my first project after business school. I’ve been surprised ever since how much understanding components of return affect fund performance ever…
-
The Inequity of Long-only Performance Fees
The stereotypical hedge fund fee structure is “2 and 20,” meaning a 2% fee on assets plus 20% of the gains. Typically gains are calculated above some threshold, particularly a high water mark. The purpose of the high water mark is to ensure the manager doesn’t get paid an incentive fee twice following periods of…
-
Arithmetic Means and Expected Returns: Don’t Fool Yourself
(Author’s note: This year I have volunteered to coordinate the Society of Actuaries (SOA) Investment Section’s sessions at the SOA annual meeting, which will be held this October in Chicago. For more information, visit the SOA annual meeting website). At this year’s Society of Actuaries’ annual meeting, one of the more anticipated discussions is likely…