Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-19T14:31:17.507Z Has data issue: false hasContentIssue false
  • English
  • Français

Investment — assessing a manager's skill and monitoring the risks

Published online by Cambridge University Press:  20 April 2012

N. Day ,
S. J. Green  and
J. Plymen
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper proposes a new way of assessing an investment manager's skill in the day-to-day management of portfolios. The authors argue that traditional investment performance measurement techniques, whilst appropriate for many purposes, do not provide the insights necessary to judge the skill of investment managers. To judge manager skill, it is necessary to consider the activity within the portfolio in terms of the purchases, sales and trades, and to determine the value added by that activity. The paper sets out a framework by which this analysis can be carried out and, by means of examples, indicates how the results can be interpreted. The paper also explores briefly a number of other issues such as the qualitative aspects of performance monitoring. In writing the paper, the concept of risk in various guises was never far from the authors' minds, and it is true to say that the meaning of risk in the context of assessing manager skill lies at the very heart of the paper.

Keywords

Manager SkillPerformance MeasurementRiskPurchasesSalesTrades
Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 121 , Issue 1 , 1994 , pp. 69 - 117
Copyright
Copyright © Institute and Faculty of Actuaries 1994

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Pegler, R. S. (1948). The actuarial principles of investment. J.I.A., 74, 179.Google Scholar
Markowitz, H. M. (1952). Portfolio selection. The Journal of Finance, VII, 77.Google Scholar
Cootner, P. H. (1962). Random vs systematic changes. Industrial Management Review, 111, 24.Google Scholar
Haycocks, H. W. & Plymen, J. (1964). The design, application and future development of the Financial Times—Actuaries Index. J.I.A. 90, 267.Google Scholar
Bank Administration Institute (1968). Report.Google Scholar
Brew, J. M. (1970). The Trustees' Meeting—a City daydream. The Investment Analyst, 28.Google Scholar
Society of Investment Analysts (1972). Report.Google Scholar
Cocks, G. (1973). A set of indices for portfolio performance analysis. The Investment Analyst, 36.Google Scholar
Eadie, D. M. (1973). A practical approach to the measurement and analysis of investment performance. The Investment Analyst, 37.Google Scholar
Brumwell, J. C. H. & Short, E. (1974). Composition of the F.T.—Actuaries Share Indices. J.S.S. 21, 1.Google Scholar
Lindey, G. M. (1975). Pension fund performance—the wood and the trees. The Investment Analyst, 41.Google Scholar
Holbrook, J. P. (1977). Investment performance of pension funds. J.I.A., 104, 15.Google Scholar
Hymans, C. & Mulligan, J. (1980). The measurement of portfolio performance. Kluwer Publishing Ltd.Google Scholar
Marshall, J. B. (1980). Pension fund performance—a new approach. The Investment Analyst, 56.Google Scholar
Clarkson, R. S. (1981). A market equilibrium model for the management of ordinary share portfolios. T.F.A., 37, 439 & J.I.A., 110, 17.Google Scholar
Clarkson, R. S. & Plymen, J. (1988). Improving the performance of equity portfolios. J.I.A., 115, 631.Google Scholar
Plymen, J. (1989). The actuarial background to investment policy. T.F.A. 40, 445.Google Scholar
Arthur, T. G. & Randall, P. A. (1990). Actuaries, pension funds and investment. J.I.A. 117, 1.Google Scholar
Day, N., Green, S. J. & Plymen, J. (1991). Active investment models. Proceedings of the 2nd AFIR International Colloquium, 3, 349.Google Scholar
Green, S. J. (1992). Another look at portfolio performance measurement. The Investment Analyst, 92.Google Scholar