A key part of the Investment Process involves tracking and analyzing the overall investment performance of a portfolio—both in absolute terms and also relative to the fluctuations of the broader markets. A thorough analysis of market and portfolio performance can teach members of the investment firm important lessons that, as a feedback loop, can be used to update both the Security Assessment and the Portfolio Construction work that has come before. For example, performance attribution can give insights to the sources of the returns and the risks that have been experienced. If the reality experienced by the portfolio ex post does not conform to the estimates calculated on an ex ante basis, changes, updates, and reallocations to the portfolio might be in order.
The visualization examples in this chapter are designed for multiple audiences—those who monitor, conduct, and present the measurement and analysis of investment performance. Analyst teams, independent of the investment function, typically perform these types of Performance Measurement and Analysis. Teams in the investment firm’s back office, usually calculate Performance Measurements, whereas the firm’s middle office typically conducts Performance Analysis—that is, Performance Attribution. Although those in the back and middle offices conduct the analysis, those in the front office ...
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