Performance Evaluation of Portfolio


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Performance Evaluation of Portfolio

  1. 1. Presentation on IAPM Topic – Portfolio Performance Evaluation
  2. 2. PORTFOLIO EVALUATION <ul><li>Last step in the process of Portfolio Management </li></ul><ul><li>The stage where we examine to what extent the objective has been achieved </li></ul><ul><li>The investor tries to find out how well the portfolio has performed </li></ul><ul><li>A study of the impact of investment decisions </li></ul><ul><li>Without PE, PM would be incomplete </li></ul>
  3. 3. Need for Evaluation <ul><li>Evaluation is an appraisal of Performance </li></ul><ul><li>Whether Investment activity is carried out by individual investors/throughMFs & investment Co,different situations arise where PE becomes imperative. These situations are, </li></ul>
  4. 4. <ul><li>Self evaluation </li></ul><ul><li>Evaluation of Portfolio Managers </li></ul><ul><li>Evaluation of Mutual Funds </li></ul>
  5. 5. Self evaluation <ul><li>Individual investors undertake the investment activity </li></ul><ul><li>They construct & manage their own Portfolio </li></ul><ul><li>The investor himself evaluates the performance of his Portfolio </li></ul><ul><li>To ID the mistakes committed </li></ul><ul><li>It enables the investor to improve his skills & achieve better performance in future </li></ul>
  6. 6. Evaluation of Portfolio Managers <ul><li>A MF/investment Co creates different Portfolios with different objectives aimed at different sets of investors </li></ul><ul><li>Each Portfolio may be entrusted to different proffessional Portfolio Managers-responsible for the Investment decisions regarding… </li></ul><ul><li>Evaluate the performance of each Portfolio& the performance of concerned Portfolio Managers </li></ul>
  7. 7. Evaluation of Mutual Funds <ul><li>Stiff competition for fund mobilisation </li></ul><ul><li>Offering Attractive returns,Min.risk,High safety & Prompt liquidity </li></ul><ul><li>Investors/Orgns intersted in placing their funds with MFs like to know their comparative performance </li></ul><ul><li>To select the BEST MF/Investment Co </li></ul>
  8. 8. Evaluation Perspective <ul><li>Transaction View </li></ul><ul><li>Security View </li></ul><ul><li>Portfolio View </li></ul>
  9. 9. Transa ction View <ul><li>Investor may evaluate every transaction of Purchase/Sale of securities </li></ul><ul><li>Transaction is evaluated as regards its Correctness & Profitability </li></ul><ul><li>Security View </li></ul><ul><li>• Evaluate the Profitability of holding each security </li></ul>
  10. 10. Portfolio View <ul><li>A Portfolio is a combination carefully selected securities </li></ul><ul><li>Combined in a specific way to reduce risk of investment to the Min. </li></ul><ul><li>Investor may attempt to evaluate the performance of portfolio as a whole without examining the securities individually </li></ul><ul><li>Consider Return along with Risk involved </li></ul><ul><li>Risk is best defined in the Portfolio level </li></ul><ul><li>The BEST Perspective for evaluation </li></ul>
  11. 11. Portfolio Performance Evaluation <ul><li>Addresses issues whether the performance was superior/inferior </li></ul><ul><li>Whether the performance was due to skill/luck </li></ul>
  12. 12. THANK YOU