Does anyone else feel like the Performance Evaluation chapter is far too long and dense for the exam weighting it has?

Sorry just ranting!

Does anyone else feel like the Performance Evaluation chapter is far too long and dense for the exam weighting it has?

Sorry just ranting!

It’s certainly longer than it should be. The overall details to know:

- TWR v. MWR (how to calculate)
- How to calculate Style and Active Management returns
- What makes a valid benchmark (SAMURAI)
- Why Manager Universes & Absolute benchmarks aren’t ideal

- Micro Attribution
- NRABIA

- Macro Attribution
- Within-Sector, Allocation Selection, Pure Sector

- Performance Appraisal formulas
- Type I v Type II errors

There’s a lot of fluff in there, but I think if you can nail the topics above you should be in good shape

woah who are you and where did you come from

On a side note I just finished the Schweser EOC on performance eval - highly recommended.

Very comprehensive!

I am struggling to find out the easy and simple way to calculate the return on MWR method. Can anyone help me?

Unfortunately there isn’t one. MWR is essentially and IRR calc. Easiest way to calculate it is probably plugging in the cash flows into your calculator: -MV for CF_{0} then the sequential cash flows for each period and the ending MV in the final period. Personally, I think it’s unlikely they ask you to calculate a MWR. In the book they literally say that it takes trial and error.

MWR can only be done with calculator as pointed above.

what does NRABIA stand for in micro attribution?

NRABIA:

- Net Contributions: Net sum of contributions and/or withdrawals. 2. Risk-Free Asset: Assumes that everything is invested in the risk-free asset. 3. Asset Categories: Assumes funds are invested in asset categories per policy allocation. 4. Benchmarks: Measures impact of the managers’ investment styles. 5. Investment Managers: Returns actually produced by the managers. 6. Allocation Effects: It is a reconciliation factor (plug).

Can any one give me brief notes regarding Type I error and Type II erroe?

Thanks.

Type 1 Error: keeping poor manager

Type 2 Error: Firing a good manager

Jahid,

I wanted to follow up to say I was mistaken regarding the possibility of being tested on MWR. I was looking through the 2017 morning exam and it looks like they ask you to calculate it. It’s a simple IRR calculation in your calculator. My bad dude