What has the manager done for me? A value-based approach to performance analysis.

Abstract

In many circumstances it is unsatisfactory to measure portfolio performance using time-weighted rates of return. There are well known problems with performance attribution analysis using time-weighted returns in a multi-interval context and it is impossible to measure the contribution of a portfolio's manager to the wealth of an individual investor. This paper shows that measurement of outcomes in terms of value solves the problems of multi-interval attribution analysis and enables precise customised assessment to be made of the manager's contribution for each investor. Working with values is also simple and transparent.