amleague PROFESSIONAL PERFORMANCE DATA

Transcription

1 amleague PROFESSIONAL PERFORMANCE DATA APPENDIX 2 amleague Performance Ratios Definition

2 Contents This document aims at describing the performance ratios calculated by amleague: 1. Standard Deviation 2. Tracking Error 3. Beta 4. Alpha 5. Positive Percentage A 6. Max Draw Down 7. Information Ratio 8. Sharpe Ratio 9. Value and Growth Indicators 10. Liquidation Costs Measurement 11. Extra-Financial Indicators

3 1. Standard Deviation The standard deviation of a statistical population, a data set, or a probability distribution is the square root of its variance. Standard deviation is a widely used measure of the variability or dispersion, being algebraically more tractable though practically less robust than the expected deviation or average absolute deviation. n: Number of periods 100 : Portfolio s expected return at time t Fund s average performance 2. Tracking Error The tracking error is a measure of how closely a portfolio follows the index to which it is benchmarked. The most common measure is the root-mean-square of the difference between the portfolio and index returns... Perf t Perf Perf t Perf n 100 : the realized return on the fund at time t the average performance of the fund : the realized return on the benchmark at time t the average performance of the benchmark

4 3. Beta The beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole. An asset with a beta of 0 means that its price is not at all correlated with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; the asset generally decreases in value if the market goes up and vice versa. cov f, i variance i, : covariance between the portfolio s rate of return and the benchmark s rate of return. : variance of the benchmark 3.1 Beta Bull Beta Bear On a specified period, n amount of daily positive variations of benchmark are identified, followed by identification of negative daily benchmark variations of (period length n). Based on the identified periods, beta bull and beta bear are calculated using the same formula as mentioned beforehand. 4. Alpha Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances. Often, the return of a benchmark is subtracted in order to consider relative performance, which yields Jensen's alpha. Perf f 100 β Perf i : : : the realized return (on the portfolio) the market return Beta between the portfolio and the benchmark

5 5. Positive Percentage Month This refers to the relative measure, the percentage of positive months, a fund or a benchmark. The ratio is equal to the number of positive performances of the month, the total number of performances during the period. count Perf 0 count Perf 6. Max Draw Down The Drawdown is the measure of the decline from a historical peak in some variable (typically the cumulative profit or total open equity of a financial trading strategy). The Maximum Drawdown (MDD) up to time T is the maximum of the Drawdown over the history of the variable.,,,,,,,,, t : t set between 1 and n, means the number of periods during the experience : portfolio s expected return at time t 7. Information Ratio The Information ratio is a measure of the risk-adjusted return of a financial security (or asset or portfolio). It is defined as expected active return divided by tracking error, where active return is the difference between the return of the security and the return of a selected benchmark index, and tracking error is the standard deviation of the active return... Perf f Perf i T. E. : portfolio s average expected return on the capital asset : average expected return on the benchmark.. : Tracking Error

6 8. Sharpe Ratio The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return (or Risk Premium) per unit of risk in an investment asset or a trading strategy, named after William Forsyth Sharpe. Perf R σ : expected return on the capital asset : is a constant risk free return throughout the period : standard deviation of the asset The Sharpe ratio is used to make a decision. It is a way to compare and classify the portfolios for a calculated risk. The more important this ratio is, the more the portfolio s performance is significant for a unit of risk. It should be higher than 1 to be more efficient than a riskless asset. Note: All performance ratios calculations are based on weekly returns. 9. Value and Growth Indicators The scorings are based on AlphaValue methodology and research. Value and Growth scorings are based on a combination of fundamental and qualitative elements over a 4 year period. Value score: Fundamental Upside, Dividend Yield, Return on Equity... Growth Score: Operating Cash Flows, EPS growth, Sales Growth, Book Value Per Share... : assets in % 20 6 : AlphaValue Growth or Value score of the instrument

7 10. Liquidation Costs Measurement Liquidation Cost measurement are based on the information provided by ITG ACE Cost Curves TM. The ACE Cost Curves TM data service provides transaction cost estimates (more precisely, expected ITG ACE model forecasts of implementation shortfall cost and standard deviation of cost) for varying order sizes. Estimates are provided for 32 trade sizes ranging from 100 shares up to 1000% of MDV (21-day median currency volume) of each security. Order size break points are chosen such that the linearly interpolated estimate and the true ITG ACE costs differ by no more than 5%. Liquidation costs are calculated for three portfolio liquidation ratios: 10% of the portfolio 20% of the portfolio 50% of the portfolio The Quantity to be liquidated on each of the lines of the portfolio is indentified as such: ,, :, : : Quantity to be liquidated of security i within the portfolio Quantity of security i within the portfolio Liquidation Ratio of the Portfolio The final liquidation costs are calculated as a weighted average between the underlying instrument representation in the portfolio and the identified cost in bps. 11. Extra-Financial Indicators Extra-financial indicators are applied on amleague SRI Europe Equities Mandate. 10 of the indicators are based on Sustainalytics proprietary methodology. For precise methodology of each indicator, please view the Sustainalytics methodology. The five remaining are based on the proprietary asset managers methodologies that can be found in the description of the specific portfolios. The calculation method described hereafter applies solely to the 4 ESG Sustainalytics indicators and 6 Concrete Indicators. Note for each indicator for each portfolio are calculated as follows: Where: : : Weight of security within the portfolio Rating of the security for a given indicator

8 Two measurement scales are used on the extra-financial indicators: (100 being the highest result, indicating the highest participation), applies to the following extra-financial indicators: o ESG Total Rating o Environment Targets to Reduce Direct GHG Emissions o Social Supply Chain Monitoring System Programs o Governance Board Independence 0-5 (5 being the result of most controversies present), which applies to the following extrafinancial Indicators: o Governance-related controversies o Social-related controversies o Environment-related controversies