m
  

Revision
Performance Evaluation
and
Management

Presented By: Sumit Shukla


!ollection of Assets.

Portfolio means a collection of financial assets

(or securities) such as shares, debentures and
government securities.

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!hanging the existing mix of securities

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Maximizing the Return

Minimizing the Risk

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Active Strategy

Passive Strategy

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 O    

Active strategy of portfolio revision involves a

process to similar to portfolio analysis and
selection, which is based on an analysis of
fundamental factors covering economy,
industries and companies as well as technical
factors.

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Ônder passive strategy some kinds of formula

plans are followed for revision.

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Mransaction !ost

Maxes

Statutory Stipulation

No single Formula

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 G ! O

§t is a technique of buying a fixed dollar

amount of a particular investment on a
regular schedule, regardless of the share price.
More shares are purchased when prices are
low, and fewer shares are bought when prices
are high. Also referred as ͞!onstant Dollar
Plan͟

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Mhis is an investment strategy in which the

portfolio͛s composition by asset class is
maintained at a certain level through periodic
adjustments.

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Performance Evaluation of
Portfolio

§t enables the investor to appraise how well the
portfolio manager has achieved the targeted
return.

§t enables the investor to examine how well the

manager has achieved the targets in comparison
to other mutual funds.

§t enables the fund authorities to evaluate the

performance of their investment decisions not
only earning a specified rate of return, in relative
terms i.e. per unit of risk.
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 Portfolio Performance And Risk
Adjusted Methods

Sharpe͛s Ratio

Mreynor͛s Measure

Jensen͛s Differential Returns

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 Sharpe͛s Ratio

A ratio developed by Nobel laureate William F.

Sharpe to measure risk adjusted performance.
§t is calculated by subtracting the risk-free rate
from the rate of return for a portfolio and
dividing the result by the standard deviation
of the portfolio return.

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 Mreynor Portfolio Performance

Developed by Jack Mreynor in 1965.

A performance measure that would apply to all

investors regardless of their risk preferences.

RM= Market return

RF= Risk Free return

Ȳ= Standard daviation

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 Differential Return (Jensen Measure)

Mhe standard is based on the manager͛s

predictive ability. Successful prediction of
security price would enable the manager to
earn higher returns than the ordinary investor
expects to earn in a given level of risk.

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 Mhe basic model of Jensen is

R=ɲ+ɴ(Rm-Rf)

R= average return of portfolio

ɲ= the intercept

ɴ= a measure of systematic risk

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 Phases of Portfolio Management

Specification of investment objectives and

constraints.

!hoice of asset mix.

Formulation of portfolio strategy.

Selection of securities.

Portfolio execution.

Portfolio revision.

Portfolio evaluation.

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 Determining your Risk Preference

Mime Horizon

Bankroll

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§nvestment Risk Pyramid

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Asset mix Asset allocation is an
investment portfolio
technique that
aims to balance the risk
and create
diversification by
dividing asset
among major
categories such as
bonds, stocks, real
estate, and cash.
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 Building an §nvestment Portfolio

Asset allocation

Asset classes

Diversification

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G !     !
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waw of warge Numbers

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A Strategy for Everyone

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alue investing

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Arowth §nvesting

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 Performance §ndex

Sharpe͛s Portfolio Performance Measure

Mreynor Portfolio Performance Measure

Jensen Portfolio Performance Measure

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