Good investments perform better than bad investments. Seems obvious, but how do we actually determine which investments are good or bad?The answer lies in how we analyze performance. Kiski’s analytics platform offers advanced performance analytics to give our clients a clear view of their portfolios, helping them make informed decisions. In this post, we'll break down the key methodologies we use and the real benefits they bring.
Performance analytics is more than just tracking whether investments go up or down - by examining metrics like returns, volatility, and how much risk is taken to achieve those returns, we get a comprehensive picture of how well a portfolio is doing. This helps investors spot strengths and weaknesses and make data-driven decisions.
There are several key metrics we focus on:
- Absolute Returns: This is the total return of a portfolio over a given period: the straightforward measure of what you made.
- Relative Returns: We compare the portfolio's performance to a benchmark or index, showing how it stacks up against the broader market.
- Volatility: This tells us how much the returns fluctuate over time, which is crucial for understanding the stability of an investment.
- Sharpe Ratio: This metric shows how much return is being achieved for the risk taken, giving a clearer picture of the investment's efficiency.
- Alpha: This measures the portfolio’s performance relative to the market.
While the most cited number will almost always be absolute return of an investment, it is crucial to examine it in the relative light of other investment choices. In a similar vein, particular large absolute and relative returns may be accompanied with a high degree of volatility making timing an important component of that investment.
With a clear understanding of which strategies are working and which are not, investors can allocate resources more effectively and optimize their portfolios for better returns. By benchmarking against relevant indices or peer groups, they can see how their portfolio stands in the market, identifying where it's leading or lagging.
Moreover, regular performance reports build transparency and trust. Building trust in the investment process and choices is crucial for managers and investors alike. When investors can track their progress, understand the impact of their decisions, and hold their advisors accountable, they’re more likely to stay confident in their investment process.
One of our family office clients sought to improve their portfolio performance by leveraging our performance analytics solutions. By leveraging Kiski's performance analytics solutions, they were able to gain deeper insights into their investment strategies. Our team conducted a thorough analysis, alongside comprehensive risk attribution and style analysis.
With better portfolio insights, they adjusted their asset allocation, identified underperforming assets, and focused on high-performing sectors. They also enhanced their existing risk management framework and saw higher risk-adjusted returns within a year.
We’re committed to equipping our clients with advanced analytical solutions that drive smarter decisions and better investment outcomes. If you’re ready to take your portfolio to the next level, contact us today to learn how our solutions can help you achieve your investment goals.
