Financial Jargon Buster Dictionary

This glossary is provided for information only and is not regulated by the Financial Services Authority.

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Performance Management

A form of analysis that attempts to compare investment manager performance. It can be critically affected by the time period selected and while some attempts have been made to look at risk adjusted returns, generally it is very difficult to assess the quality of those returns. Good performance measurement should include: analysis of performance over a business cycle (typically 3-5 years) and assessment of returns on a quarterly basis, ideally by sectors as well as total returns; ensuring that like is being compared with like - the best way to do this is to look at each manager's benchmark, or risk profile, and compare performance against the benchmark, preferably on a sector basis; and analysis of the reason for any extreme out-or-under performance in a given period (e.g. whether a large overweight position exists in one or a few securities or a sector).