What is Your Investment Advisor's Handicap?
31 Pages Posted: 3 May 2023
Date Written: May 2, 2023
We propose a golf inspired Advisor Assessment Framework with a Scorecard, Fairway Average and Handicap as performance measures to assess an Advisor’s investment recommendations. The Scorecard measures the performance of an Advisor in relation to a benchmark at each interval of the evaluation period - as in each hole of the course. The Fairway Average measures the propensity of an Advisor to take more or less risk than the benchmark - as in the shot selection for the course layout. And finally, the Handicap measures the Advisor's performance across periods that can be looked at as Regimes - as different courses or periods. The premise is that the score ranges as distances from the benchmark, at each interval, over the evaluation periods can give insights into the ability and path profiles of the Advisor's investment recommendations. Since these measures only need the Advisor's performance and a benchmark they are simple to calculate, easily explainable, and uniformly applicable. The definition of an Advisor extends to anyone recommending assets, portfolios, and such (e.g., Financial Advisors, Portfolio Managers, Funds, Publications, et al).
Keywords: Financial Advisor, Portfolio Manager, Fund, Investment Manager, Hedge Fund, Mutual Fund, ETF, Private Equity, Real Estate, Infrastructure, Performance Measure
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