Risk Adjusted Performance Analysis

Does your investment manager beat the portfolio benchmark mandated by your investment policy?

- An easy question for most to answer.

Does your investment manager beat the portfolio benchmark mandated by your investment policy after those returns are adjusted for the risks an investment manager has taken to generate those returns?

- Not such an easy question for most to answer.

Nominal portfolio and benchmark return comparisons have little meaning, and are often misleading. Risk-adjusted performance measurement provides a clearer picture as to whether or not an investment manager is adding value. Companies can be surprised by the fact that an investment manager who has outperformed a benchmark has not done so when those returns are adjusted for the risks taken to generate those returns. The converse is also true that an under performing investment manager may, in fact, be outperforming the benchmark after returns are risk-adjusted.  Which situation is yours?

SAA employs a number of risk-adjusting techniques to assist its clients in answering this critical value question.  Portfolio and benchmarks returns are processed through a number of risk-adjusting calculations to reduce returns to a "per unit of return per unit of risk" concept.  It is this concept that allows the returns to be compared to a more meaningful, value-oriented way.