How soon should a performance team take corrective action when quantification shows that a firm may be drifting toward below-par performance via its portfolios?
FTF News put this question and others to James Askar, head of portfolio analysis at Man Group, who attended the Performance Measurement Europe (PME) 2018 conference in London this past September. He also was a panelist for the discussion, “Quantifying Portfolio Management,” which took place on the second day of the event.
“I think a good rule of thumb is to take action immediately, if possible,” Askar says, in response. “That’s not always, you know, disciplinary action. But it could be talking to the portfolio manager and the risk team about what may have happened and monitoring definitely to see if that ever happens again. So, there should be different levels of action taken. But, if the same mistakes have been made more than once, then obviously it should ratchet up.”
Firms should also take care when they are judging a portfolio, Askar says.
“I think the most common misconception is: what is the investment thesis for that portfolio and what is the benchmark, if it has one?” Askar says. “That one can often lead to misconceptions about a portfolio especially when measured against peer groups. You have all sorts of different portfolios in a peer group and you need to know what the theme is, potentially, that the fund manager is trying to replicate. And you need some context into what the underlying strategy is — not just that it is a U.K. equity fund or a corporate bond fund.”
CREDITS:
Videography and editing: Timothy Foster Photography & Film
Interview conducted by: Maureen Lowe, president and founder of Financial Technologies Forum (FTF)
Co-Producers: Sarah Hathaway, vice president, FTF; and Eugene Grygo, chief content officer (CCO), FTF.
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