The investments industry, via the Association for Investment Management
and Research (AIMR), has developed global standards for the presentation
of performance to prospective investors. Even if we were notin a position of being a prospective purchaser of investment manager
services, the standards are important because they effectively govern the
methodology used by the industry to calculate and present returns. In
this section we cover the calculation and interpretation of the numbers
presented according to AIMR standards to help answer questions
including:
■ What does a manager do to meet the standards?
■ How do we interpret the composite returns presented by managers?
■ How have all of the portfolios entrusted to the manager performed
on average?
■ How closely have the manager’s portfolios managed with the same
strategy performed?
In this section we summarize the industry standards for the presentation
of performance measurement results to investors. Given the
degree of influence of the standards not just on performance presentation,
but also other aspects of performance measurement, attention is
paid to the calculation and interpretation of the required statistics
including composite returns, and equal- and asset-weighted composite
dispersion statistics.