The document discusses methods for attributing internal rate of return (IRR) for investment portfolios. It explains that attributing money-weighted returns (MWRs) allows for consideration of external cash flows and the timing of investments, unlike time-weighted returns (TWRs). The document proposes a framework for decomposing returns that combines MWR and TWR attribution to provide different perspectives on performance and connect various return measurement and attribution methods.
This document provides an overview of bank account reconciliation in SAP. It discusses how bank accounts are set up with a main bank account and clearing accounts for outgoing/incoming checks and transfers. It also describes the process of uploading a bank statement, either manually or electronically, to reconcile the bank balance in SAP with the bank's statement. The document explains how to configure check deposits, manual bank statements, and electronic bank statements by setting up account symbols, keys, posting rules, business transactions, and variants.
1) Existem contas estáveis devedoras, estáveis credoras e instáveis; 2) Contas estáveis devedoras como Caixa e Estoques sempre têm saldo devedor, enquanto contas estáveis credoras como Fornecedores sempre têm saldo credor; 3) Contas como Resultado podem ter saldo devedor ou credor e são consideradas instáveis.
Okay, let's break this down step-by-step:
* Offer price per share is $48
* Mix is 20% cash, 80% stock
* To calculate the exchange ratio, we take the stock portion as a percentage of the total consideration
* Stock portion is 80% of $48, which is 0.8 * $48 = $38.40
* Cash portion is 20% of $48, which is 0.2 * $48 = $9.60
* Total consideration is $38.40 stock + $9.60 cash = $48
* To get the exchange ratio, we take the stock portion ($38.40) and divide it by the acquirer's stock price.
White Star Capital Germany Venture Capital Landscape 2020JeandeLencquesaing
We are pleased to publish the second edition of our German Venture Capital report and hope you will enjoy reading it. 2019 was a year where Germany has really played to its strengths and cemented its position as one of the European leaders in tech venture capital, and we are more excited than ever about the development of this ecosystem.
Our report unpacks the current progress and outlook for the German ecosystem using our ecosystem model to highlight Germany’s unique positioning in an increasingly global playing field for startups.
So what did we find?
- Germany had a record year in VC reaching $5.7bn in funding with 49% yoy growth, the second best funded country in Europe
- Germany leverages its global industrial leadership to retain its place as the top destination for European mobility VC investment in 2019, reaching $1.3bn in funding, representing 26% of total funding. Its corporate strengths also drive investments in fintech and B2B software, representing 23% and 20% of total funding, respectively.
- Corporate Venture Capital plays a key role and participates in 58% of the total funding, the highest level worldwide. Next47 (Siemens), IFB Hamburg, Bosch are some of the most active German CVCs. As LPs (investors in VCs), corporates represent 28% of total German VC funds raised, the highest level in Europe, further boosting the local ecosystem
In addition to sharing our excitement about Germany and expressing our belief that the ecosystem is stronger than ever we look at robust business networks, the continued government support via entities such as KfW and the vibrant founder community.
White Star Capital has made landmark investments in Germany and seen many of the findings play out with our portfolio companies. Tier has raised Series B in 2019 led by international investors such as Mubadala, Goodwater and ourselves, while Clark has benefited from a large domestic market for insurance.
Sap implementation project, rollout project, supporting project, upgrading pr...Abdulrahman Abdulrahim
This document discusses different types of SAP projects including implementation projects, rollout projects, supporting projects, and upgrading projects. It focuses on implementation projects providing additional details about what they entail and how they are executed.
This document provides instructions for configuring profit center accounting in SAP. It covers basic settings like maintaining controlling area settings, creating a dummy profit center, and setting control parameters. It also covers master data like maintaining the standard hierarchy and creating profit centers. Transfer pricing settings like defining account determination for internal goods movements are described. Instructions for planning include defining number ranges, maintaining the planning layout, and defining distributions. Actual postings and period-end closing are also addressed at a high level. The document is a comprehensive guide for setting up and configuring profit center accounting functionality in SAP.
The document discusses the differences between intercompany reconciliation in SAP ECC versions compared to SAP R/3 version 4.7. It notes that in ECC versions, intercompany reconciliation is a multi-step process compared to the single step process in 4.7. It also outlines the different transaction codes used to access intercompany reconciliation in the two systems and highlights changes to the screens and additional functionality available in ECC versions.
This document provides an overview of bank account reconciliation in SAP. It discusses how bank accounts are set up with a main bank account and clearing accounts for outgoing/incoming checks and transfers. It also describes the process of uploading a bank statement, either manually or electronically, to reconcile the bank balance in SAP with the bank's statement. The document explains how to configure check deposits, manual bank statements, and electronic bank statements by setting up account symbols, keys, posting rules, business transactions, and variants.
1) Existem contas estáveis devedoras, estáveis credoras e instáveis; 2) Contas estáveis devedoras como Caixa e Estoques sempre têm saldo devedor, enquanto contas estáveis credoras como Fornecedores sempre têm saldo credor; 3) Contas como Resultado podem ter saldo devedor ou credor e são consideradas instáveis.
Okay, let's break this down step-by-step:
* Offer price per share is $48
* Mix is 20% cash, 80% stock
* To calculate the exchange ratio, we take the stock portion as a percentage of the total consideration
* Stock portion is 80% of $48, which is 0.8 * $48 = $38.40
* Cash portion is 20% of $48, which is 0.2 * $48 = $9.60
* Total consideration is $38.40 stock + $9.60 cash = $48
* To get the exchange ratio, we take the stock portion ($38.40) and divide it by the acquirer's stock price.
White Star Capital Germany Venture Capital Landscape 2020JeandeLencquesaing
We are pleased to publish the second edition of our German Venture Capital report and hope you will enjoy reading it. 2019 was a year where Germany has really played to its strengths and cemented its position as one of the European leaders in tech venture capital, and we are more excited than ever about the development of this ecosystem.
Our report unpacks the current progress and outlook for the German ecosystem using our ecosystem model to highlight Germany’s unique positioning in an increasingly global playing field for startups.
So what did we find?
- Germany had a record year in VC reaching $5.7bn in funding with 49% yoy growth, the second best funded country in Europe
- Germany leverages its global industrial leadership to retain its place as the top destination for European mobility VC investment in 2019, reaching $1.3bn in funding, representing 26% of total funding. Its corporate strengths also drive investments in fintech and B2B software, representing 23% and 20% of total funding, respectively.
- Corporate Venture Capital plays a key role and participates in 58% of the total funding, the highest level worldwide. Next47 (Siemens), IFB Hamburg, Bosch are some of the most active German CVCs. As LPs (investors in VCs), corporates represent 28% of total German VC funds raised, the highest level in Europe, further boosting the local ecosystem
In addition to sharing our excitement about Germany and expressing our belief that the ecosystem is stronger than ever we look at robust business networks, the continued government support via entities such as KfW and the vibrant founder community.
White Star Capital has made landmark investments in Germany and seen many of the findings play out with our portfolio companies. Tier has raised Series B in 2019 led by international investors such as Mubadala, Goodwater and ourselves, while Clark has benefited from a large domestic market for insurance.
Sap implementation project, rollout project, supporting project, upgrading pr...Abdulrahman Abdulrahim
This document discusses different types of SAP projects including implementation projects, rollout projects, supporting projects, and upgrading projects. It focuses on implementation projects providing additional details about what they entail and how they are executed.
This document provides instructions for configuring profit center accounting in SAP. It covers basic settings like maintaining controlling area settings, creating a dummy profit center, and setting control parameters. It also covers master data like maintaining the standard hierarchy and creating profit centers. Transfer pricing settings like defining account determination for internal goods movements are described. Instructions for planning include defining number ranges, maintaining the planning layout, and defining distributions. Actual postings and period-end closing are also addressed at a high level. The document is a comprehensive guide for setting up and configuring profit center accounting functionality in SAP.
The document discusses the differences between intercompany reconciliation in SAP ECC versions compared to SAP R/3 version 4.7. It notes that in ECC versions, intercompany reconciliation is a multi-step process compared to the single step process in 4.7. It also outlines the different transaction codes used to access intercompany reconciliation in the two systems and highlights changes to the screens and additional functionality available in ECC versions.
CO-PA allows companies to analyze profitability by market segments defined by characteristics like products, customers, and regions. It uses master data like cost elements, characteristics, and profitability segments. Actual values flow into CO-PA from transactions in modules like SD, FI, and CO-PC. Planning is done using versions, levels, and data transfer from other modules. Reports provide drilldown and detail views of profitability analysis.
IAS 1 establishes the overall framework and requirements for the presentation of financial statements. It requires entities to present a complete set of financial statements including a balance sheet, income statement, statement of changes in equity, and cash flow statement. It provides guidance on fair presentation, materiality, offsetting, comparative information, structure and minimum line items for each financial statement. It also outlines the disclosure requirements for the notes to the financial statements.
SAP Roll Out - An Introduction and Advantagesanjalirao366
In this presentation, a SAP Support Consultant from ArchitectSAP Solutions will give you a brief about SAP Roll Out Projects.
For More Information, Please visit:-
http://www.architectsap.com
With the aid of this software Accounts Receivable, General Ledger, Accounts Payable, Tax, are incorporated into SAP. So when payments are made and products are sold, entries in the books are automatically updated in the system.
This chapter discusses business combinations and the acquisition method of accounting for them. Under the acquisition method, accounting for a business combination follows a 5-step process: 1) identify the acquirer, 2) determine the acquisition date, 3) calculate the purchase consideration, 4) recognize and measure the identifiable assets and liabilities acquired at fair value, and 5) recognize and measure goodwill or gain from a bargain purchase. The chapter provides an example application of the acquisition method and discusses recognition of goodwill, consolidation, and other relevant topics. It includes several practice cases for students to apply the concepts.
Profit Center Accounting enables structuring a company according to strategic business units (SBUs) to provide full income statements and selected balance sheet items by business line and sector. It reflects material movements between SBUs at commercial transfer prices rather than cost. Master data must be organized by assigning objects to profit centers. Actual values flow through the profit centers in parallel to business transactions. The information system provides reports on profit centers, including interactive and list-oriented reports.
SAP Budgetary Control enables precise monitoring of revenue, expenditures, and financial equilibrium by comparing commitment and actual values to budgets. It integrates tightly with SAP FI and CO modules. Key activities include annual budgeting by expense head and responsibility area, periodic funds release, additional closing activities, and master data maintenance. Funds management influences posting procedures through availability controls and budget monitoring to prevent overruns.
Sap fico interview_questions_answers_explanationsRanjit Kumar
The exchange rate can be derived in the following ways in SAP:
1. Automatically from the exchange rate table based on the currency and date.
2. Manually entered on the document header.
3. Derived from a purchase order or sales order if the transaction is being posted from a document.
4. An average rate can be calculated and entered if multiple rates are applicable on a given date.
5. A fixed exchange rate can be defined for a currency in Customizing which will always be used for that currency combination.
So in summary, the rate can be automatic from the table, manual entry, from a source document, an average rate or a fixed customized rate.
Accounting Standard 25 outlines the requirements for interim financial reporting, including:
- Minimum content of interim reports which includes condensed financial statements and selected explanatory notes
- Principles for recognizing and measuring items in interim reports, which should be consistent with annual financial statements
- Periods for which interim reports must be presented, which is normally on a year-to-date basis
- Disclosures in annual financial statements if a separate interim report is not issued for the final interim period
Accounting for non accounting professionalsMunir Ahmad
This document provides an overview of basic accounting concepts for non-accounting professionals. It defines accounting as the process of recording, analyzing, and communicating financial transactions. It then outlines key accounting concepts like the basic accounting equation of assets equaling liabilities plus equity, the different accounting cycles like purchase, sales, and payroll, and basic financial statements including the balance sheet, income statement, and cash flow statement. It concludes with explaining tools for analysis like ratio analysis and an introduction to cost accounting, financial planning, and taxation.
Planning in COPA SAP can be done manually by inputting figures or automatically by inputting sales quantities only. There are several steps to configure automatic planning in COPA, including assigning valuation strategies, costing keys, value fields, and condition types in IMG. Costing sheets can then be created and maintained in COPA to calculate sales revenue from planned quantities based on the configured condition types and records. The configuration can be tested using valuation simulation to verify automatic valuation of planned data.
This document provides an overview of investment fundamentals and strategies for managing wealth. It discusses diversifying investments across different asset classes like cash, bonds, property and shares to reduce risk. Regular investing and taking a long-term approach can help maximize returns. Managed funds provide diversification and professional management, while direct shares give more control but require more resources. The document aims to help readers make informed investment decisions to achieve their financial goals and lifestyle aspirations.
This document discusses retained earnings and dividends. It defines retained earnings as profits generated by a corporation that are retained for future use. When dividends are declared, they reduce retained earnings. Dividends can be paid in cash, property, or additional shares. The document outlines the accounting entries for declaring and paying different types of dividends, including cash, property, share dividends, and liquidating dividends. It also discusses the effects of share splits.
The document discusses asset accounting in SAP, including:
- Asset accounting is a subsidiary ledger of financial accounting that updates general ledger accounts.
- Asset classes are used to group assets, assign accounts and default values, and structure assets for reporting.
- Charts of depreciation define depreciation areas for book, tax, and other purposes across asset classes.
- Master data includes creating asset records via asset classes or copying, and time-dependent assignments.
- Asset acquisitions can integrate with accounts payable/receivable or use a clearing account.
This document summarizes the key requirements of IAS 1 regarding the presentation of financial statements. It outlines the general purpose and components of financial statements, including statements of financial position, comprehensive income, changes in equity, and cash flows. It describes the general features that financial statements must adhere to, such as fair presentation, going concern basis, accrual accounting, materiality and offsetting. It provides details on the minimum line items that must be presented in each financial statement and notes. In the end, it gives examples of how Burj Bank implemented IAS 1 in its own financial statements.
This program calculates and carries forward customer and vendor account balances from the previous fiscal year to the new year. To run the program, the user selects the company code, fiscal year to transfer balances to, and range of customer and vendor accounts. The program carries forward any remaining balances and stores them in the opening balances for the selected accounts in the new fiscal year. It should be run at the start of each new fiscal year and any time discrepancies arise between the prior year ending and current year opening balances for accounts.
SAP FI automatic payment program (configuration and run)kalralalit1
This document provides steps to configure and run the Automatic Payment Program (APP) in SAP ECC 6.0 for processing vendor payments. It describes 6 steps to configure payment methods, company codes, bank determination, and assign payment methods to vendors. It then provides a step-by-step example of running APP which includes creating a vendor invoice, generating a payment proposal, reallocating line items, running the payment, and viewing payment documents. Upon completion, cleared line items can be viewed confirming successful APP execution.
SAP HANA and SAP Controlling – New Opportunities and New ChallengesJohn Jordan
You've heard the buzz about SAP HANA, but what does it mean to you? This presentation will introduce the technical concepts behind in-memory data management and how those concepts impact SAP Controlling. This session will cover:
*Basic SAP HANA architecture including column vs. row storage and how this impacts how data can be stored and accessed in CO
*Insight into how (and why!) SAP is gradually removing aggregates from CO so that only line items remain
*How partitioning worked in the past and how SAP CO will potentially change to accommodate new opportunities
*Changes on the horizon for SAP HANA and their relevance for Controlling users
Gain a solid understanding of how you can apply SAP HANA functionality to simplify your access to and analysis of controlling data.
Commitment Management in SAP tracks future commitments against cost objects; this enables users to make a realistic comparison of actual cost plus committed cost against plan / budget on that cost object. Commitments are made when user creates purchasing document to purchase goods or services at a future date. Comparing actual against budget is misleading unless you factor in the outstanding commitments that will convert to actual cost in the future.
Blogs on www.veritysolutions.com.au
The document discusses best practices for investment reporting to existing clients. It notes that while the GIPS Standards provide guidance for prospective clients, guidance is also needed for reporting to existing clients. There is currently no common understanding around key aspects of reporting like return calculation methodology and definitions. The document outlines past efforts to develop guidance and calls for establishing best practices to increase transparency, improve communication, and reduce conflicts of interest in investment reporting.
The document outlines the agenda and materials for Swiss Re's Investors' Day on June 15, 2005. It includes presentations on corporate strategy, Swiss Re's global business, risk management, asset management strategy, capital adequacy and outlook. The asset management strategy section discusses Swiss Re's absolute return approach to investment management, including constructing replicating portfolios to determine insurance liability values and tailoring investments to maximize shareholder returns while considering liability structures. Active management examples provided include equity exposure management and fixed income duration adjustments.
CO-PA allows companies to analyze profitability by market segments defined by characteristics like products, customers, and regions. It uses master data like cost elements, characteristics, and profitability segments. Actual values flow into CO-PA from transactions in modules like SD, FI, and CO-PC. Planning is done using versions, levels, and data transfer from other modules. Reports provide drilldown and detail views of profitability analysis.
IAS 1 establishes the overall framework and requirements for the presentation of financial statements. It requires entities to present a complete set of financial statements including a balance sheet, income statement, statement of changes in equity, and cash flow statement. It provides guidance on fair presentation, materiality, offsetting, comparative information, structure and minimum line items for each financial statement. It also outlines the disclosure requirements for the notes to the financial statements.
SAP Roll Out - An Introduction and Advantagesanjalirao366
In this presentation, a SAP Support Consultant from ArchitectSAP Solutions will give you a brief about SAP Roll Out Projects.
For More Information, Please visit:-
http://www.architectsap.com
With the aid of this software Accounts Receivable, General Ledger, Accounts Payable, Tax, are incorporated into SAP. So when payments are made and products are sold, entries in the books are automatically updated in the system.
This chapter discusses business combinations and the acquisition method of accounting for them. Under the acquisition method, accounting for a business combination follows a 5-step process: 1) identify the acquirer, 2) determine the acquisition date, 3) calculate the purchase consideration, 4) recognize and measure the identifiable assets and liabilities acquired at fair value, and 5) recognize and measure goodwill or gain from a bargain purchase. The chapter provides an example application of the acquisition method and discusses recognition of goodwill, consolidation, and other relevant topics. It includes several practice cases for students to apply the concepts.
Profit Center Accounting enables structuring a company according to strategic business units (SBUs) to provide full income statements and selected balance sheet items by business line and sector. It reflects material movements between SBUs at commercial transfer prices rather than cost. Master data must be organized by assigning objects to profit centers. Actual values flow through the profit centers in parallel to business transactions. The information system provides reports on profit centers, including interactive and list-oriented reports.
SAP Budgetary Control enables precise monitoring of revenue, expenditures, and financial equilibrium by comparing commitment and actual values to budgets. It integrates tightly with SAP FI and CO modules. Key activities include annual budgeting by expense head and responsibility area, periodic funds release, additional closing activities, and master data maintenance. Funds management influences posting procedures through availability controls and budget monitoring to prevent overruns.
Sap fico interview_questions_answers_explanationsRanjit Kumar
The exchange rate can be derived in the following ways in SAP:
1. Automatically from the exchange rate table based on the currency and date.
2. Manually entered on the document header.
3. Derived from a purchase order or sales order if the transaction is being posted from a document.
4. An average rate can be calculated and entered if multiple rates are applicable on a given date.
5. A fixed exchange rate can be defined for a currency in Customizing which will always be used for that currency combination.
So in summary, the rate can be automatic from the table, manual entry, from a source document, an average rate or a fixed customized rate.
Accounting Standard 25 outlines the requirements for interim financial reporting, including:
- Minimum content of interim reports which includes condensed financial statements and selected explanatory notes
- Principles for recognizing and measuring items in interim reports, which should be consistent with annual financial statements
- Periods for which interim reports must be presented, which is normally on a year-to-date basis
- Disclosures in annual financial statements if a separate interim report is not issued for the final interim period
Accounting for non accounting professionalsMunir Ahmad
This document provides an overview of basic accounting concepts for non-accounting professionals. It defines accounting as the process of recording, analyzing, and communicating financial transactions. It then outlines key accounting concepts like the basic accounting equation of assets equaling liabilities plus equity, the different accounting cycles like purchase, sales, and payroll, and basic financial statements including the balance sheet, income statement, and cash flow statement. It concludes with explaining tools for analysis like ratio analysis and an introduction to cost accounting, financial planning, and taxation.
Planning in COPA SAP can be done manually by inputting figures or automatically by inputting sales quantities only. There are several steps to configure automatic planning in COPA, including assigning valuation strategies, costing keys, value fields, and condition types in IMG. Costing sheets can then be created and maintained in COPA to calculate sales revenue from planned quantities based on the configured condition types and records. The configuration can be tested using valuation simulation to verify automatic valuation of planned data.
This document provides an overview of investment fundamentals and strategies for managing wealth. It discusses diversifying investments across different asset classes like cash, bonds, property and shares to reduce risk. Regular investing and taking a long-term approach can help maximize returns. Managed funds provide diversification and professional management, while direct shares give more control but require more resources. The document aims to help readers make informed investment decisions to achieve their financial goals and lifestyle aspirations.
This document discusses retained earnings and dividends. It defines retained earnings as profits generated by a corporation that are retained for future use. When dividends are declared, they reduce retained earnings. Dividends can be paid in cash, property, or additional shares. The document outlines the accounting entries for declaring and paying different types of dividends, including cash, property, share dividends, and liquidating dividends. It also discusses the effects of share splits.
The document discusses asset accounting in SAP, including:
- Asset accounting is a subsidiary ledger of financial accounting that updates general ledger accounts.
- Asset classes are used to group assets, assign accounts and default values, and structure assets for reporting.
- Charts of depreciation define depreciation areas for book, tax, and other purposes across asset classes.
- Master data includes creating asset records via asset classes or copying, and time-dependent assignments.
- Asset acquisitions can integrate with accounts payable/receivable or use a clearing account.
This document summarizes the key requirements of IAS 1 regarding the presentation of financial statements. It outlines the general purpose and components of financial statements, including statements of financial position, comprehensive income, changes in equity, and cash flows. It describes the general features that financial statements must adhere to, such as fair presentation, going concern basis, accrual accounting, materiality and offsetting. It provides details on the minimum line items that must be presented in each financial statement and notes. In the end, it gives examples of how Burj Bank implemented IAS 1 in its own financial statements.
This program calculates and carries forward customer and vendor account balances from the previous fiscal year to the new year. To run the program, the user selects the company code, fiscal year to transfer balances to, and range of customer and vendor accounts. The program carries forward any remaining balances and stores them in the opening balances for the selected accounts in the new fiscal year. It should be run at the start of each new fiscal year and any time discrepancies arise between the prior year ending and current year opening balances for accounts.
SAP FI automatic payment program (configuration and run)kalralalit1
This document provides steps to configure and run the Automatic Payment Program (APP) in SAP ECC 6.0 for processing vendor payments. It describes 6 steps to configure payment methods, company codes, bank determination, and assign payment methods to vendors. It then provides a step-by-step example of running APP which includes creating a vendor invoice, generating a payment proposal, reallocating line items, running the payment, and viewing payment documents. Upon completion, cleared line items can be viewed confirming successful APP execution.
SAP HANA and SAP Controlling – New Opportunities and New ChallengesJohn Jordan
You've heard the buzz about SAP HANA, but what does it mean to you? This presentation will introduce the technical concepts behind in-memory data management and how those concepts impact SAP Controlling. This session will cover:
*Basic SAP HANA architecture including column vs. row storage and how this impacts how data can be stored and accessed in CO
*Insight into how (and why!) SAP is gradually removing aggregates from CO so that only line items remain
*How partitioning worked in the past and how SAP CO will potentially change to accommodate new opportunities
*Changes on the horizon for SAP HANA and their relevance for Controlling users
Gain a solid understanding of how you can apply SAP HANA functionality to simplify your access to and analysis of controlling data.
Commitment Management in SAP tracks future commitments against cost objects; this enables users to make a realistic comparison of actual cost plus committed cost against plan / budget on that cost object. Commitments are made when user creates purchasing document to purchase goods or services at a future date. Comparing actual against budget is misleading unless you factor in the outstanding commitments that will convert to actual cost in the future.
Blogs on www.veritysolutions.com.au
The document discusses best practices for investment reporting to existing clients. It notes that while the GIPS Standards provide guidance for prospective clients, guidance is also needed for reporting to existing clients. There is currently no common understanding around key aspects of reporting like return calculation methodology and definitions. The document outlines past efforts to develop guidance and calls for establishing best practices to increase transparency, improve communication, and reduce conflicts of interest in investment reporting.
The document outlines the agenda and materials for Swiss Re's Investors' Day on June 15, 2005. It includes presentations on corporate strategy, Swiss Re's global business, risk management, asset management strategy, capital adequacy and outlook. The asset management strategy section discusses Swiss Re's absolute return approach to investment management, including constructing replicating portfolios to determine insurance liability values and tailoring investments to maximize shareholder returns while considering liability structures. Active management examples provided include equity exposure management and fixed income duration adjustments.
WealthElements is a comprehensive, customizable and fully integrated suite of tools designed to help financial advisors manage every element of their clients\' wealth.
A brief presentation on the value of our proposition for clients of a solicitors practice and why you may consider applying to become a referral partner (all applications subject to consideration)
This document provides an overview of key concepts related to a company's balance sheet. It discusses how business activities affect balance sheet accounts, how companies keep track of balances, and common account titles that appear on the balance and income statements. The document also covers the accounting equation, analyzing transactions, preparing journal entries, and using T-accounts to track balances over time.
This document provides an overview and cautionary statements for DMC's presentation at an industrial conference. It summarizes DMC's business segments, global presence, and financial highlights. The document also cautions readers that DMC's forward-looking statements are based on management's current assessments and involve risks and uncertainties that could cause actual results to differ materially.
This document discusses how firm investments can shape the competitive landscape of an industry. It presents hypotheses about the relationships between aggregate R&D and advertising investments and industry growth and volatility. The results show that R&D investments generally have an inverted U-shaped relationship with industry profit growth and volatility, while advertising investments have a U-shaped relationship. So firm-level decisions can impact both the firm and its industry environment.
SANTANDER NETWORK-SANTANDER INVESTOR DAY 2011BANCO SANTANDER
Banco Santander España (Santander Network). Presentación en el Investor Day 2011 de Enrique García Candelas, director general de Banca Comercial España. En inglés
This document compares two business models for insurance contracts: (1) the underwriting business model and (2) the asset-liability business model.
The underwriting business model focuses on underwriting income or loss, with key metrics of premiums charged and earned and claims incurred. Risks are re-underwritten annually and contracts are cancellable. The asset-liability business model focuses on investment results, mortality, and lapse experience, with premiums and returns on investment as key metrics. Risks are not re-underwritten annually and contracts terminate upon occurrence of the insured risk event.
The document provides an overview of a common sense approach to value investing. It discusses analyzing businesses by understanding the business model, industry dynamics, competitive advantages, financials, management and risks. Key steps include understanding the business, industry, sources of competitive advantage, profitability, cash flows, management quality and identifying risks. Examples provided include analyzing a Spanish winemaker, cement industry, Norwegian furniture maker, airline catering company and assessing their business quality, industry dynamics, competitive advantages and risks. The goal is to invest in well-run companies that are undervalued after understanding all aspects of the business.
This document provides an overview of accounting tools and concepts. It discusses accounting as an information system that processes raw data into financial statements and reports for stakeholders. It presents sample financial statements from San Miguel Corporation including the statement of financial position from 2009-2011. The statement of financial position shows assets, liabilities, and equity over time. It also discusses key accounting ratios like return on investment and internal rate of return that are useful for management decision making. In the end, it emphasizes that accounting provides important financial information and analysis for various stakeholders through statements, reports, and performance metrics.
The document discusses business cases and their importance. It notes that business cases are not just financial models or documentation, but persuasive arguments for decisions. The document outlines key components of business cases, including benefits, costs, drivers, metrics, risks, and techniques for analyzing sensitivity and risks.
This investor presentation discusses DMC's financial highlights and global business operations. It provides cautionary statements about forward-looking projections and explains how non-GAAP financial measures are used. DMC has three business segments and a diversified customer base. It is the dominant provider of explosion-welded clad metal plates and has a global network of production and sales facilities.
The document provides an overview of portfolio management services (PMS) offered by Excel MF. It discusses how a PMS can help align client objectives, balance different fund manager styles, provide single point reporting and track markets/asset allocation on behalf of clients. It notes that even when individual funds underperform, a good PMS can overcome this through market calls. Scheme selection is critical, with over a 100% gap in returns between top and worst performers. The PMS invests using an in-house fund selector tool and deploys a dynamic asset allocation approach across conservative, balanced and aggressive plans starting from Rs. 5 lakhs with different fee options. Pioneer Investcorp is an integrated financial services firm that also
The document provides an overview of Dynamic Materials Corporation (DMC) and includes cautionary statements about forward-looking projections. It discusses DMC's three business segments, financial highlights, global operations, and competing cladding technologies. DMC is a leading provider of explosion-welded metal plates and has operations in explosive metalworking, oilfield products, and welding. The document reviews DMC's markets, growth strategy, and historical financial and operational performance.
This document discusses forward-looking statements and non-GAAP financial measures. It warns that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. It also states that non-GAAP financial measures should not be considered substitutes for GAAP measures and provides reconciliations. The document introduces Kevin Longe, who will become CEO, and outlines objectives of leveraging strengths for growth, expanding product offerings, enhancing operational framework, and pursuing acquisitions.
WPS Resources Corporation saw increased revenues and net income in 2005. The company is committed to creating value for shareholders, customers, employees and communities by growing its utility investments, maintaining a strong nonregulated business, and reducing its risk profile. Various initiatives are aimed at improving efficiency and reducing costs.
Defining high level organizational architecturesNicolay Worren
The consultant was hired to help clarify roles and responsibilities across a large Nordic bank's organizational units. They gathered data through interviews and documentation. They mapped the bank's high-level functions to its organizational structures, noting deviations from its governance principles. They also modeled alternative structures with more independent functions to potentially improve performance by reducing coupling between roles. The analysis aimed to increase understanding of current issues and raise awareness of design options.
This document contains forward-looking statements regarding the company's financial condition and results of operations that are subject to risks and uncertainties. These risks include the ability to obtain new contracts, fluctuations in customer demand, competitive factors, timely contract completion, timing and size of expenditures, receipt of government approvals, labor supply, availability and cost of funds, and general economic conditions. The company does not undertake to update forward-looking statements. Actual results may vary materially from anticipated results.
Similar to IRR attribution / profit and loss attribution (20)
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
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1. Illmer
IIPC Investment Performance
Consulting AG
IRR Attribution
Date: November 2011
Produced by: Dr. Stefan J. Illmer
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 1
2. IRR Attribution
Agenda
Introduction
Calculation of IRR
Contribution to IRR
IRR attribution
Hypothetical example
Simple example for an IRR implementation
Critical aspects
Comments and questions
Appendix: Profit and loss attribution
References
Contact details and disclaimer
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 2
3. IRR Attribution
Introduction
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 3
4. IRR Attribution
Initial comments on TWR attribution
Decomposing the TWR is common practice and the main method implemented
by performance attribution software providers, means that:
Portfolio and benchmark returns are TWRs.
Segment and stock returns are TWRs.
Return contributions are calculated using TWRs.
Use of TWRs assumes that portfolio manager has no discretion over any
(external as well as internal) cash flows.
Impact of internal as well as external cash flows are neutralized.
Impact of over- / underweighting of segments or stocks is dealt by using
weights instead of cash flows.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 4
5. IRR Attribution
Initial comments on MWR attribution
Decomposing the MWR is not common practice and not offered by performance
attribution software providers, means that:
Decomposing the MWR or TWR using the "MWR-concept" is not common
practice.
The effect of cash flows is not allocated properly.
The management effects may be misleading.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 5
6. IRR Attribution
Initial comments on MWR
Money-weighted rate of return (MWR) measures the return of a portfolio in a
way that the return is sensitive to changes in the money invested:
MWR measures the return from a client’s perspective where he does have
control over the (external) cash flows.
MWR does not allow a comparison across peer groups.
MWR does allow a comparison against a benchmark (adjusted for cash
flows).
MWR is best measured by the internal rate of return (IRR).
Calculating, decomposing and reporting MWRs is not common practice.
MWRs are not generally covered by the GIPS Standards - just for private
equity and closed end real estate funds.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 6
7. IRR Attribution
Decomposition of MWR versus TWR
The MWR allows a decomposition of the portfolio return reflecting the client’s
main investment decision:
TWR Benchmark effect => reflects the return contribution based on the
client’s decision to invest his initial capital into a specific benchmark strategy
(corresponds to the TWR benchmark return).
TWR Management effect => reflects the return contribution based on
deviating from the benchmark strategy by asset allocation and stock picking
(corresponds to the TWR attribution effects).
MWR Timing effect => reflects the return contribution of changing the
initial invested capital into the benchmark strategy and into the asset
allocation of the portfolio (corresponds to the difference between MWR and
TWR).
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 7
8. IRR Attribution
Decomposition of MWR – Another perspective
The MWR allows also a decomposition of the portfolio return without explicitly
separating the timing effect:
MWR Benchmark effect => reflects the return contribution based on the
client’s decision to invest his capital into a specific benchmark strategy
(including the effect of changing the initial invested capital).
MWR Management effect => reflects the return contribution based on
deviating from the benchmark strategy by asset allocation and stock picking
(including the effect of changing the initial invested capital).
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 8
9. IRR Attribution
Comparison of different decomposition approaches
TWR
TWR + TWR + MWR
Benchmark effect Management effects Timing effect
MWR
MWR + MWR
Benchmark effect Management effects
TWR Timing TWR Timing
+ +
Benchmark effect Benchmark effect Management effects Management effects
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 9
10. IRR Attribution
General framework for decomposing returns (1/2)
The MWR-calculation and MWR-attribution allow to define a general framework
for decomposing returns:
That combines the different views on performance (client versus portfolio
manager).
That connects the different return measurement methods (TWR and MWR).
That connects the different return attribution methods (TWR and MWR).
That corresponds to absolute profit & loss measurement and profit & loss
attribution.
Etc.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 10
11. IRR Attribution
General framework for decomposing returns (2/2)
"Odd" questions can be better answered using the general framework for
decomposing returns; including MWRs!
Multiplying the
The return is positive weights with the
but I lost money - return does not lead
how come? to my absolute profit
- how come?
The segment return is
positive but its return
contribution is negative What is my on
- how come? average invested
capital?
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 11
12. IRR Attribution
Calculation of IRR
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 12
13. IRR Attribution
First step towards IRR attribution
Calculation of the IRR for the portfolio.
Calculation of the IRR for the benchmark
=> by simulating the portfolio's cash in- and outflows also for the
benchmark.
Calculation of the excess IRR.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 13
14. IRR Attribution
Calculation of the IRR for the portfolio (1/2)
������−1
������������������������ −������������,������
0= ������������
+ ������������−0
− ������������������������
1 + ������������������������ 1 + ������������������������
������=1
To calculate the MWR, in the industry different methodologies are used where all but one
are approximation methods for the “true” MWR. In the following the internal rate of return
methodology (IRR) as the "true" MWR is used because it is not only the most precise
method for calculating a MWR but the one methodology that solves the full calculation
problem. The IRR is the return / interest rate that causes the ending market value and
intermediate cash flows to be discounted to the beginning market value.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 14
15. IRR Attribution
Calculation of the IRR for the portfolio (2/2)
������������������������ = Portfolio beginning market value.
������������������������ = Portfolio ending market value at T.
������������������������ = IRR of portfolio.
������������,������ = Portfolio cash flow at t.
������������ = Length of measurement period (to be measured in years – 365).
������������−0 = Length of time period between the beginning of the measurement
period and the date of the cash flow (to be measured in years – 365).
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 15
16. IRR Attribution
Calculation of the IRR for the benchmark
������−1 ������ℎ������������������: ������������,������ = ������������,������
������������������������ −������������,������
0= ������������
+ ������������−0
− ������������������������
1 + ������������������������ 1 + ������������������������
������=1
������������������������ = Benchmark beginning market value.
������������������������ = Benchmark ending market value at T.
������������������������ = IRR of benchmark.
������������,������ = Benchmark cash flow at t.
Here it is important that the cash inflows (outflows) are invested (de-invested) according
to the actual benchmark asset allocation at the time of the cash flow and that the returns
of the money invested equal the respective returns of the underlying benchmark
investments. In addition cash flows have to be simulated for rebalancing activities.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 16
17. IRR Attribution
Calculation of the excess IRR
������������������������������ = ������������������������ − ������������������������ ������������������������������ = Excess IRR.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 17
18. IRR Attribution
Contribution to IRR
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 18
19. IRR Attribution
Second step towards IRR attribution
Calculation of the profit and loss of the different asset classes.
Calculation of the average invested capital for the different asset classes.
Calculation of the asset class contribution to the IRR for the portfolio.
Calculation of the asset class contribution to the IRR for the benchmark.
Calculation of the asset class contribution to the excess IRR.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 19
20. IRR Attribution
Calculation of the profit and loss
������−1
������������������ = Profit and loss of portfolio.
������������������ = ������������������������ − ������������������������ − ������������,������
������=1
������ ������ ������−1
������������������ = ������������������,������ = ������������������������,������ − ������������������������,������ − ������������,������,������
������=1 ������=1 ������=������
������������������,������ = Profit and loss of asset class i.
������������������������,������ = Ending market value of asset class i.
������������������������,������ = Beginning market value of asset class i.
������������,������,������ = Cash flow of asset class i at t.
Same formulas apply
for the benchmark
n = Number of asset classes.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 20
21. IRR Attribution
Calculation of the average invested capital (1/3)
������������������ ������������������������ = Average invested capital of portfolio.
������������������������ =
������������������������
������������������,������ ������������������������,������ = Average invested capital of asset class i.
������������������������,������ =
������������������������,������ ������������������������,������ = IRR of asset class i.
Basic idea: Within the IRR framework every cash flow series can be transferred to a cash
flow series consisting of two cash flows - the cash inflow at the beginning of the
investment period and a cash outflow at the end of the investment period. For such a
cash flow series the average invested capital is equal to the cash inflow at the beginning
of the investment period.
Same formulas apply
for the benchmark
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 21
22. IRR Attribution
Calculation of the average invested capital (2a/3)
31.12.2008 31.12.2009 31.12.2010
- 100.00 = + 5.00 - 50.00 = - 45.00 + 157.50
P&L = + 12.50 and IRR = 5.00%
31.12.2008 31.12.2009 31.12.2010
- 100.00 = + 5.00 - 50.00 = - 45.00 + 157.50
Compounded with cost of * (1 + 5.00%)
capital - here equals IRR - 47.25
- 100.00 + 110.25
* (- 1) / (1 + 5.00%)^2
IRR = 5.00%
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 22
23. IRR Attribution
Calculation of the average invested capital (2b/3)
31.12.2008 31.12.2009 31.12.2010
- 100.00 P&L = + 10.25
* (- 1) * (1 + 5.00%)^2 - 1
12.50 / 10.25 = 1.2195...
- 121.95 P&L = + 12.50
* (- 1) * (1 + 5.00%)^2 - 1
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 23
24. IRR Attribution
Calculation of the average invested capital (2c/3)
31.12.2008 31.12.2009 31.12.2010
- 100.00 = + 5.00 - 50.00 = - 45.00 + 157.50
- 100.00 +105.00
+ 5.00
/ (1 + 5.00%)^1
+ 4.76 0.00
-50.00
- 47.62 / (1 + 5.00%)^1 + 52.50
- 142.86 + 157.50
* (- 1) * (1 + 5.00%)^2 - 1
Remark: 142.86 is not the "correct" AIC for the relevant cash flow stream as the P&L is not
12.50 but instead 14.64. The difference is due to the interest costs or earnings of
the interim cash flows - here for the first period (- 0.24 and + 2.38).
Interpretations: One could have earned absolute 2.14 more if 45.00 where also
available for investment in the first period (increasing AIC from 121.95 to 142.86).
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 24
25. IRR Attribution
Calculation of the average invested capital (3/3)
1
12.50 12.50
������������������������ = 2−1
= = 121.95 ⟺
1 + 5.00% 10.25%
2
10.25 10.25
������������������������ = 2−1
= = 100.00
1 + 5.00% 10.25%
1 2
������������1
������ ������������2
������ 1 2
������������1
������
������������������������ = ������������������������ ⟺ 1 = 2 ⟺ ������������������������ = ������������������������ × 2
������������������������ ������������������������ ������������������
In absolute terms the average invested capital (AIC) of the two cash flow streams (the
original and the transferred one) are not identical but the AIC as well as the absolute
profit and loss are multiples of each other driven by the ratio between the different P&L
figures.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 25
26. IRR Attribution
Calculation of the contribution to the IRR for the portfolio
������ ������ ������
������������������ ������������������,������ ������������������������,������
������������������������ = = = × ������������������������,������ = ������������������,������
������������������������ ������������������������ ������������������������
������=1 ������=1 ������=1
������������������,������ = Contribution to IRR of asset class i.
It is important to note that the average invested capital of the total portfolio does not have
to be equal to the sum of the average invested capitals of all asset classes (due to the
different implicit reinvestment assumptions).
������
������������������������ ≤ ������������ = ������������ ≥ ������������������������,������
������=1
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 26
27. IRR Attribution
Calculation of the contribution to the IRR for the benchmark
������ ������ ������
������������������ ������������������,������ ������������������������,������
������������������������ = = = × ������������������������,������ = ������������������,������
������������������������ ������������������������ ������������������������
������=1 ������=1 ������=1
������������������,������ = Contribution to IRR of asset class i.
������������������ = Profit and loss of benchmark.
������������������,������ = Profit and loss of asset class i.
������������������������ = Average invested capital of benchmark.
������������������������,������ = Average invested capital of asset class i.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 27
28. IRR Attribution
Calculation of the contribution to the excess IRR
������ ������
������������������������������ = ������������������������ − ������������������������ = ������������������,������ − ������������������,������
������=1 ������=1
������ ������ ������ ������
������������������������,������ ������������������������,������ ������������������,������ ������������������,������
������������������������������ = × ������������������������,������ − × ������������������������,������ = −
������������������������ ������������������������ ������������������������ ������������������������
������=1 ������=1 ������=1 ������=1
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 28
29. IRR Attribution
IRR attribution
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 29
30. IRR Attribution
Third and last step towards IRR attribution
Here the excess IRR is decomposed according to the Brinson, Hood and Beebower
return attribution methodology and therefore split up into the asset allocation effect, stock
picking effect and interaction effect.
������ ������ ������
������������������������������ = ������������������������ − ������������������������ = ������������������������ + ������������������������ + ������������������������ = ������������������������,������ + ������������������������,������ + ������������������������,������
������=1 ������=1 ������=1
������������������������ = Asset allocation effect of portfolio.
������������������������,������ = Asset allocation effect of asset class i.
������������������������ = Stock picking effect of portfolio.
������������������������,������ = Stock picking effect of asset class i.
������������������������ = Interaction effect of portfolio.
������������������������,������ = Interaction effect of asset class i.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 30
31. IRR Attribution
Simple framework for IRR attribution (1/5)
Selection
Actual Passive
Quadrant II
IRR of notional
Actual
Quadrant IV
portfolio 1
Asset Allocation
IRR of actual portfolio
=> active asset allocation
portfolio
Quadrant III
Passive
IRR of notional Quadrant I
portfolio 2 IRR of benchmark
=> active stock picking portfolio
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 31
32. IRR Attribution
Simple framework for IRR attribution (2/5)
Quadrant IV represents the IRR of the Quadrant II represents the IRR of the
actual portfolio which reflects all passive notional portfolio 1 which reflects the active
and active investment management asset allocation of the portfolio assuming no
decisions. The calculation of the IRR of stock picking. The calculation of the IRR of
the actual portfolio is based on the actual the notional portfolio 1 is based on the actual
weights of the asset classes - expressed weights of the asset classes - expressed as
as cash flows - and the respective actual cash flows - and the respective passive
returns. index returns.
Quadrant III represents the IRR of the Quadrant I represents the IRR of the
notional portfolio 2 which reflects the benchmark. The calculation of the IRR of the
active stock picking of the portfolio benchmark is based on the passive weights
assuming no active asset allocation. The of the asset classes - expressed as cash
calculation of the IRR of the notional flows - and the respective passive index
portfolio 2 is based on the passive returns.
weights of the asset classes - expressed
as cash flows - and the respective actual
returns.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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33. IRR Attribution
Simple framework for IRR attribution (3/5)
������ ������
������������������������ = ������������������������������������������������ ������������ − ������������������������������������������������ ������ = ������������������������������1 − ������������������������ = ������������������������1,������ − ������������������,������
������=1 ������=1
������������������������������1 = IRR of notional portfolio 1.
������������������������1,������ = Contribution to IRR of asset class i.
������ ������
������������������������ = ������������������������������������������������ ������������������ − ������������������������������������������������ ������ = ������������������������������2 − ������������������������ = ������������������������2,������ − ������������������,������
������=1 ������=1
������������������������������2 = IRR of notional portfolio 2.
������������������������2,������ = Contribution to IRR of asset class i.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 33
34. IRR Attribution
Simple framework for IRR attribution (4/5)
������������������������ = ������������������������������������������������ ������������ − ������������������������������������������������ ������������������ − ������������������������������������������������ ������������ + ������������������������������������������������ ������
������������������������ = ������������������������ − ������������������������������2 − ������������������������������1 + ������������������������
������ ������ ������ ������
������������������������ = ������������������,������ − ������������������������2,������ − ������������������������1,������ + ������������������,������
������=1 ������=1 ������=1 ������=1
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 34
35. IRR Attribution
Simple framework for IRR attribution (5/5)
On an asset class level:
������������������������,������ = ������������������������1,������ − ������������������,������
������������������������,������ = ������������������������2,������ − ������������������,������
������������������������,������ = ������������������,������ − ������������������������2,������ − ������������������������1,������ + ������������������,������
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 35
36. IRR Attribution
Hypothetical example
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37. IRR Attribution
Hypothetical example – Assumptions (1/8)
Sample multi-asset class portfolio is investing in two asset classes A and B.
Relevant benchmark is also investing in these two asset classes A and B.
The portfolio as well the benchmark are rebalanced on a yearly basis at the
beginning of the calendar year.
A two year period from 31.12.2006 until 31.12.2008 is considered.
At the beginning of 2007 EUR 150 are invested in the portfolio.
At the beginning of 2008 additional EUR 100 are invested into the portfolio
according to the then current active asset allocation and stock pickings.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 37
38. IRR Attribution
Hypothetical example – Return calculations (2a/8)
Actual Portfolio (IRR)
Period 1 Period 2
Dates 31.12.2006 31.12.2007 31.12.2008
Cash flow at beginning Cash flow at beginning Market value at the end
of period of period of period
Asset A -75.0 47.6 36.7
Asset B -75.0 -147.6 240.8
Portfolio -150.0 -100.0 277.5
Actual weights at Actual weights at Weights at the end of
beginning of period beginning of period period
Asset A 50.0% 15.0% 13.2%
Asset B 50.0% 85.0% 86.8%
Portfolio 100.0% 100.0% 100.0%
Actual return Actual return Cummulative return
Asset A 15.0% -5.0% 17.9%
Asset B -5.0% 10.0% 12.4% Remark: negative (positive) cash
flow means cash inflow
Portfolio 5.0% 7.8% 13.8% (outflow).
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 38
39. IRR Attribution
Hypothetical example – Return calculations (2b/8)
Actual Portfolio (IRR)
Period 1 Period 2
Dates 31.12.2006 31.12.2007 31.12.2008
Cash flow at beginning Cash flow at beginning Market value at the end
of period of period of period
Asset A -75.0 47.6 36.7
Asset B -75.0 -147.6 240.8
Portfolio -150.0 -100.0 277.5
Actual weights at Actual weights at Weights at the end of
beginning of period beginning of period period
Asset A 50.0%
75 15.0% + 15% − 15% × 150 × 1 + 5% + 100
× 1 13.2%
Asset B 50.0% 85.0%
= 86.25 − 15% × 157.5 + 100
86.8%
Portfolio 100.0% 100.0% = 86.25 − 38.625 = 47.625
100.0%
Actual return Actual return Cummulative return
Asset A 15.0% -5.0% 17.9%
Asset B -5.0% 10.0% 12.4% Remark: negative (positive) cash
flow means cash inflow
Portfolio 5.0% 7.8% 13.8% (outflow).
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IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 39
40. IRR Attribution
Hypothetical example – Return calculations (3/8)
Benchmark (IRR)
Period 1 Period 2
Dates 31.12.2006 31.12.2007 31.12.2008
Cash flow at beginning Cash flow at beginning Market value at the end
of period of period of period
Asset A -45.0 -39.5 83.0
Asset B -105.0 -60.6 167.2
Portfolio -150.0 -100.0 250.2
Passive weights at Passive weights at Weights at the end of
beginning of period beginning of period period
Asset A 30.0% 30.0% 33.2%
Asset B 70.0% 70.0% 66.8%
Portfolio 100.0% 100.0% 100.0%
Passive return Passive return Cummulative return
Asset A -20.0% 10.0% -2.2%
Asset B 10.0% -5.0% 1.3% Remark: negative (positive) cash
flow means cash inflow
Portfolio 1.0% -0.5% 0.1% (outflow).
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IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 40
41. IRR Attribution
Hypothetical example – Return calculations (4/8)
Notional Portfolio 1 (IRR)
Period 1 Period 2
Dates 31.12.2006 31.12.2007 31.12.2008
Cash flow at beginning Cash flow at beginning Market value at the end
of period of period of period
Asset A -75.0 23.6 40.0
Asset B -75.0 -123.6 195.8
Portfolio -150.0 -100.0 235.8
Actual weights at Actual weights at Weights at the end of
beginning of period beginning of period period
Asset A 50.0% 15.0% 17.0%
Asset B 50.0% 85.0% 83.0%
Portfolio 100.0% 100.0% 100.0%
Passive return Passive return Cummulative return
Asset A -20.0% 10.0% -18.2%
Asset B 10.0% -5.0% -2.0% Remark: negative (positive) cash
flow means cash inflow
Portfolio -5.0% -2.8% -7.0% (outflow).
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IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 41
42. IRR Attribution
Hypothetical example – Return calculations (5/8)
Notional Portfolio 2 (IRR)
Period 1 Period 2
Dates 31.12.2006 31.12.2007 31.12.2008
Cash flow at beginning Cash flow at beginning Investment at the end of
of period of period period
Asset A -45.0 -23.7 71.7
Asset B -105.0 -76.3 193.7
Portfolio -150.0 -100.0 265.3
Passive weights at Passive weights at Weights at the end of
beginning of period beginning of period period
Asset A 30.0% 30.0% 27.0%
Asset B 70.0% 70.0% 73.0%
Portfolio 100.0% 100.0% 100.0%
Actual return Actual return Cummulative return
Asset A 15.0% -5.0% 5.2%
Asset B -5.0% 10.0% 8.7% Remark: negative (positive) cash
flow means cash inflow
Portfolio 1.0% 5.5% 7.7% (outflow).
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IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 42
43. IRR Attribution
Hypothetical example – Management effects (6/8)
Actual Portfolio (IRR)
P&L AIC IRR RC
Asset A 9.3 52.1 17.9% 4.7%
Asset B 18.1 146.8 12.4% 9.1%
Portfolio 27.5 198.4 13.8% 13.8%
Benchmark (IRR)
P&L AIC IRR RC
Asset A -1.5 64.9 -2.2% -0.7%
Asset B 1.7 135.2 1.3% 0.8%
Portfolio 0.2 200.1 0.1% 0.1%
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IIPC Investment Performance
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44. IRR Attribution
Hypothetical example – Management effects (7/8)
Notional Portfolio 1 (IRR)
P&L AIC IRR RC
Asset A -11.4 62.6 -18.2% -5.7%
Asset B -2.8 137.2 -2.0% -1.4%
Portfolio -14.2 201.0 -7.0% -7.0%
Notional Portfolio 2 (IRR)
P&L AIC IRR RC
Asset A 3.0 56.7 5.2% 1.5%
Asset B 12.4 142.4 8.7% 6.2%
Portfolio 15.3 199.1 7.7% 7.7%
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 44
45. IRR Attribution
Hypothetical example – Management effects (8a/8)
Remark: Here high IAE due to the big shifts. in
the asset allocation.
IRR-Attribution
AAE SPE IAE Total
Asset A -4.9% 2.2% 8.1% 5.4%
Asset B -2.2% 5.4% 5.2% 8.3%
Portfolio -7.2% 7.6% 13.3% 13.7%
Remark: IRR figures are consistent with the
absolute profit & loss figures – see
Profit and Loss Attribution appendix.
AAE SPE IAE Total
Asset A -9.9 4.4 16.2 10.8
Asset B -4.5 10.7 10.3 16.4
Portfolio -14.4 15.1 26.5 27.2
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 45
46. IRR Attribution
Hypothetical example – Management effects (8b/8)
IRR-Attribution
AAE SPE IAE Total
Asset A -4.9% 2.2% 8.1% 5.4%
Asset B -2.2% 5.4% 5.2% 8.3%
Portfolio -7.2% 7.6% 13.3% 13.7%
Profit and Loss Attribution
AAE SPE IAE Total
Asset A -9.9 ������������������������14.4 ������������������ = −11.4 − −1.5 = 10.8
− 16.2 −9.9
Asset B -4.5 10.7 10.3 16.4
Portfolio -14.4 15.1 26.5 27.2
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 46
47. IRR Attribution
Simple example for an IRR implementation
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48. IRR Attribution
Simple example for an IRR implementation (1/3)
before cash flow
Asset allocation in % 31.12.2009 31.03.2010 30.06.2010 30.09.2010 31.12.2010
Cash - 99.50 99.00 98.51 98.01
Bonds - 618.00 624.18 314.45 308.17
Equities - 255.00 234.60 918.06 1'009.87
Total portfolio - 972.50 957.78 1'331.02 1'416.05
Cash flows 31.12.2009 31.03.2010 30.06.2010 30.09.2010 31.12.2010
Cash 100.00 - - - -
Bonds 600.00 - -300.00 - -
Equities 300.00 - 600.00 - -
Total portfolio 1'000.00 - 300.00 - -
Asset allocation in % 31.12.2009 31.03.2010 30.06.2010 30.09.2010 31.12.2010
after cash flow
Cash 100.00 99.50 99.00 98.51 98.01
Bonds 600.00 618.00 324.18 314.45 308.17
Equities 300.00 255.00 834.60 918.06 1'009.87
Total portfolio 1'000.00 972.50 1'257.78 1'331.02 1'416.05
Investment returns 31.12.2009 31.03.2010 30.06.2010 30.09.2010 31.12.2010
Cash -0.50% -0.50% -0.50% -0.50%
Bonds 3.00% 1.00% -3.00% -2.00%
Equities -15.00% -8.00% 10.00% 10.00%
Total portfolio -2.75% -1.51% 5.82% 6.39%
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 48
49. IRR Attribution
Simple example for an IRR implementation (2/3)
Remark: negative (positive) cash flow
means cash inflow (outflow).
Cash flows for IRR 31.12.2009 31.03.2010 30.06.2010 30.09.2010 31.12.2010
Cash -100.00 - - - 98.01
Bonds -600.00 - 300.00 - 308.17
Equities -300.00 - -600.00 - 1'009.87
Total portfolio -1'000.00 - -300.00 - 1'416.05
Profit & Loss TWR Timing effect IRR Contribution to IRR
Cash -1.99 -1.99% 0.00% -1.99% -0.17%
Bonds 8.17 -1.11% 2.93% 1.82% 0.71%
Equities 109.87 -5.38% 24.01% 18.63% 9.57%
Total portfolio 116.05 7.83% 2.28% 10.11% 10.11%
Investment Reporting based on TWR shows wondrous results:
Negative TWR but absolute profit for bonds and equities.
Negative TWRs for all asset classes but positive TWR for the total portfolio.
…
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 49
50. IRR Attribution
Simple example for an IRR implementation (3/3)
30%
25%
20%
15%
TWR
10%
Timing effect
IRR
5%
0%
-5%
-10%
Cash Bonds Equities Total portfolio
Illmer Produced by: Dr. Stefan J. Illmer
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51. IRR Attribution
Critical aspects
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52. IRR Attribution
Critical aspects
Unrealistic (re-)investment assumption:
=> explicit / realistic (re-)investment assumptions (MIRR).
Multiple solutions for IRR:
=> explicit / realistic (re-)investment assumptions.
IRR for benchmarks:
=> public market equivalent (PME) used in private equity industry.
Peer group comparison:
=> IRR not designed for peer analysis.
Risk measurement:
=> IRR not designed for dispersion analytics.
Implied interim asset values differ from true interim asset value
=> IRR is designed as an average return for the reporting period.
...
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 52
53. IRR Attribution
Comments and questions
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IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 53
54. IRR Attribution
Appendix: Profit and loss attribution
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IIPC Investment Performance
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55. IRR Attribution
Last step towards profit and loss attribution
Here the excess profit and loss is decomposed according to the Brinson, Hood and
Beebower return attribution methodology and therefore split up into the asset allocation
effect, stock picking effect and interaction effect.
������������������������ = ������������������ − ������������������ = ������������������������������ + ������������������������������ + ������������������������������
������ ������ ������
= ������������������������������,������ + ������������������������������,������ + ������������������������������,������
������=1 ������=1 ������=1
������������������������������ = Profit and loss of portfolio due to asset allocation.
������������������������������,������ = Profit and loss of asset class i due to asset allocation.
������������������������������ = Profit and loss of portfolio due to stock picking.
������������������������������,������ = Profit and loss of asset class i due to stock picking.
������������������������������ = Profit and loss of portfolio due to interaction.
������������������������������,������ = Profit and loss of asset class i due to interaction.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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56. IRR Attribution
Simple framework for profit and loss attribution (1/5)
Selection
Actual Passive
Quadrant II
P&L of notional
Actual
Quadrant IV
portfolio 1
Asset Allocation
P&L of actual portfolio
=> active asset allocation
portfolio
Quadrant III
Passive
P&L of notional
Quadrant I
portfolio 2
P&L of benchmark
=> active stock picking
portfolio
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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57. IRR Attribution
Simple framework for profit and loss attribution (2/5)
Quadrant IV represents the P&L of the Quadrant II represents the P&L of the
actual portfolio which reflects all passive notional portfolio 1 which reflects the active
and active investment management asset allocation of the portfolio assuming no
decisions. The calculation of the P&L of stock picking. The calculation of the P&L of
the actual portfolio is based on the actual the notional portfolio 1 is based on the actual
weights of the asset classes - expressed weights of the asset classes - expressed as
as cash flows - and the respective actual cash flows - and the respective passive
returns. index returns.
Quadrant III represents the P&L of the Quadrant I represents the P&L of the
notional portfolio 2 which reflects the benchmark. The calculation of the P&L of
active stock picking of the portfolio the benchmark is based on the passive
assuming no active asset allocation. The weights of the asset classes - expressed as
calculation of the P&L of the notional cash flows - and the respective passive
portfolio 2 is based on the passive index returns.
weights of the asset classes - expressed
as cash flows - and the respective actual
returns.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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58. IRR Attribution
Simple framework for profit and loss attribution (3/5)
������ ������
������������������������������ = ������������������������������������������������ ������������ − ������������������������������������������������ ������ = ������������������������1 − ������������������ = ������������������������1,������ − ������������������,������
������=1 ������=1
������������������������1 = Profit and loss of notional portfolio 1.
������������������������1,������ = Profit and loss of asset class i.
������ ������
������������������������������ = ������������������������������������������������ ������������������ − ������������������������������������������������ ������ = ������������������������2 − ������������������ = ������������������������2,������ − ������������������,������
������=1 ������=1
������������������������2 = Profit and loss of notional portfolio 2.
������������������������2,������ = Profit and loss of asset class i.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 58
59. IRR Attribution
Simple framework for profit and loss attribution (4/5)
������������������������������ = ������������������������������������������������ ������������ − ������������������������������������������������ ������������������ − ������������������������������������������������ ������������ + ������������������������������������������������ ������
������������������������������ = ������������������ − ������������������������2 − ������������������������1 + ������������������
������ ������ ������ ������
������������������������������ = ������������������,������ − ������������������������2,������ − ������������������������1,������ + ������������������,������
������=1 ������=1 ������=1 ������=1
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 59
60. IRR Attribution
Simple framework for profit and loss attribution (5/5)
On an asset class level:
AAPLP,i = PLNP1,i − PLB,i
SPPLP,i = PLNP2,i − PLB,i
IAPLP,i = PLP,i − PLNP2,i − PLNP1,i + PLB,i
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IIPC Investment Performance
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61. References
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IIPC Investment Performance
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62. IRR Attribution
References
“Determinants of Portfolio Performance”; in: Financial Analysts Journal; July
1986; by G. Brinson, R. Hood & G. Beebower.
“Investment Performance Measurement”; by Bruce J. Feibel.
“Decomposing the Money-Weighted Rate of Return”; in: Journal of
Performance Measurement; Summer 2003; page 42-50; by Stefan J. Illmer
and Wolfgang Marty.
“Decomposing the Money-Weighted Rate of Return”; at the Performance
Attribution Risk Management 11th Annual; 5th of November 2003; by Stefan
J. Illmer.
“Decomposing the Money-Weighted Rate of Return - an Update”; in: Journal
of Performance Measurement; Fall 2009; page 22-29; by Stefan J. Illmer.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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63. Contact details and disclaimer
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64. Contact details
Illmer Investment Performance Consulting AG
Weinbergstrasse 28
CH - 8200 Schaffhausen
Switzerland
www.iipc-ag.com
Dr. Stefan Joachim Illmer
Tel. +41 / 79 / 962 20 37
Email: stefan.illmer@iipc-ag.com
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
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65. Disclaimer
This document was produced by Illmer Investment Performance Consulting AG (hereafter "IIPC-
AG") with the greatest of care and to the best of its knowledge and belief. However, IIPC-AG
provides no guarantee with regard to its content and completeness and does not accept any liability
for losses which might arise from making use of this information. This document is provided for
information purposes only and is for the exclusive use of the recipient. It does not constitute an offer
or a recommendation to buy or sell financial instruments or banking services.
It is expressly not intended for persons who, due to their nationality or place of residence, are not
permitted access to such information under local law.
Illmer Produced by: Dr. Stefan J. Illmer
IIPC Investment Performance
Consulting AG Success through excellence! Date: November 2011 - Slide 65