Performance Evaluation of Active Managers: An Overview of Current Practice
Investments & Wealth Monitor, January/February 2011
8 Pages Posted: 27 Oct 2010 Last revised: 22 Nov 2011
Date Written: October 21, 2010
Historically, manager skill has been measured simply as the difference in average returns between the portfolio and the benchmark index. Managers were considered skillful if their active weights against the benchmark led to outperformance. However, a manager tilting toward a certain risk-factor, relative to his benchmark, could appear to be skilled at stock picking or market timing. In response; with the advent of more advanced attribution technologies, the definition of manager alpha has become far more sophisticated and precise.
Keywords: Performance, Evaluation
JEL Classification: G10, G20
Suggested Citation: Suggested Citation