Investment Performance Evaluation

Timely evaluation of investment performance is critical at two levels for our clients:

• First, the overall return of the total portfolio is the ultimate measure of the investor's relative success versus the goals and objectives set for the fund.
• Second, the performance of the underlying investment managers is of great interest, in order to confirm that they continue to perform at the levels expected. While responsibility for investment decisions can be delegated to an investment manager, it is still important to make sure they are the right firm for the job. In both instances, relative performance compared to appropriate benchmarks and peer group universes provides a measure of the success.

We use the Independent Consultants' Cooperative (ICC) Universe of tax-exempt funds for comparing investment performance. The universe is nationally recognized as one of the largest and most complete performance databases in the consulting industry. Its flexibility, coupled with our proprietary reporting capability, allows us to customize our analysis to the clients' specific requirements. The depth and scope of the ICC Universe allows us to provide meaningful comparative portfolio diagnostics across a broad range of risk and return measures. The size of the Universe allows us to examine cross sections of the investment world and examine relative results among asset classes, plan sponsor types and other such distinctive criteria. This affords a very focused and detailed performance evaluation for each client, no matter how unique.

This dynamic performance database also allows evaluation of each manager against the most appropriate passive benchmarks and style universes and measures returns on a risk-adjusted basis, utilizing quantitative measurement tools such as tracking error, standard deviation, alpha, information ratio, beta, Treynor ratio and Sharpe ratio. It provides attribution analysis that help determine the sources of return for each portfolio.

Thorough performance measurement allows our clients to:

• Have independently computed investment results and risk assessments
• Know how their portfolios have performed compared to passive benchmarks and to other similarly managed portfolios
• Make informed decisions about investment policy, asset allocation, and investment manager selection
• Compare their fund's asset allocation to its strategic targets allowing more timely rebalancing decisions
• Satisfy requirements for monitoring investment managers