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PerfCalc for Dummies

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PerfCalc In Detail
QuickView (also to right and PerfCalc Home), Detail, and Tutorials by Subject

 

1: Add accounts/portfolios @ Account Detail tab:

  • Minimum of Account Name and Number.
  • Save.
  • Go to 'Load' and highlight and double-click to retrieve an existing account/portfolio, 'D' to duplicate (Control/Alt/D to duplicate with data), '-' to delete, and '+' to add a new account/portfolio, and 'X' to close the Window.

2: Enter any number of dated market values:

  • Market values include investments, dividends, interest, income, fees paid from the account, etc.
  • Do not enter internal portfolio cash flows separately — such as dividends, interest, and income — as they are reflected in subsequent user entered and dated market values.
  • Any two user selected Market Value entries are possible performance calculation analysis ranges; days, weeks, months, years.
    • An analysis range is defined as being from close of business to close of business; year, Market Values December 31, 2010 and December 31, 2011, quarters, December 31, 2010 to March 31, 2011, March 31, 2011 to June 31, 2011, etc.
  • PerfCalc Type: Market Value.
    • @ Investment Detail and Performance tab, click on '+' icon to enter data.
    • Data may be entered in any order and will be applied if within user selected performance calculation range.
      • If you like, click on 'Sort' icon to sort data by date.

3: Enter cash flows:

  • Cash flows are defined by GIPS as 'investor initiated external cash flow contributions and/or withdrawals;' investor adds money to the account, investor withdraws money from the account.
  • PerfCalc Types: dated Investor Contributions and dated Investor Withdrawals.

Performance calculation methodology options:

 

4: Modified Dietz

  • Select any two user entered dated Market Values:
    • PerfCalc will take cash flows within the the performance calculation analysis range into consideration.
    • Save.
    • Retrieve, View, Print.

 

PerfCalc steps 2-4 will calculate correct and compliant performance calculations for almost all situations.

 

Keep in mind:

  • If there are no cash flows or very small cash flows within a performance calculation analysis range, all performance calculation methodologies will generate the same or similar (insignificant variance) performance calculations.

PerfCalc step 5 is required by GIPS only if there is a large cash flow(s) — contribution(s) and/or withdrawal(s) — within an portfolio

performance calculation analysis range; typically greater than 5% of the market value of the portfolio before the cash flow.

 

5: Large Cash Flows Geometric Linking

  • GIPS requires a large cash flow calculation when there is a large cash flow:
    • Large cash flow is undefined by GIPS.
      • Typically greater than 5% of the value of the total portfolio before the cash flow.
        • 5% or less will show from no to little performance calculation variance when compared to Modified Dietz.
    • User must define their own 'large cash flow' percentage; with GIPS requirement to 'be consistent.'
      • User should try different large cash flow amounts and toggle between performance calculation tabs to establish when the differences in performance calculations are considered by the user to be 'significant.'
    • Enter dated Market Values and dated Investor Contributions and dated Investor Withdrawals as done @ Modified Dietz.
    • Enter dated Market Values on the date(s) prior to a large cash flow(s); Investor Contribution(s) and/or Investor Withdrawal(s).
    • Click on TWRR/Geometric Linking tab @ the Investment Detail and Performance tab.
    • Check 'Large Cash Flows @ TWRR/Geometric Linking tab.
    • Toggle between Modified Dietz and TWRR/Geometric Linking tabs to compare performance calculations.
    • Save.
    • Retrieve, View, Print.

 

PerfCalc step 5 is required only if you wish to generate the most accurate performance calculation; recognizing that the added data input time and effort will not, in almost every case, generate a performance calculation variance that is significant.

 

6: Daily Valuation

  • Same as Large Cash Flows Geometric Linking except that market values are entered on the dates prior to all cash flows.
    • Uncheck 'Large Cash Flows @ TWRR/Geometric Linking tab.
    • Save.
    • Retrieve, View, Print.

7: Accruals

 

There is no need to enter accruals unless you wish to calculate performance within two market values where accruals have been earned but not yet paid and you want accruals taken into consideration to more accurately reflect profit and performance for that period:

  • Assume periods A-B and B-C; with Market Value entries @ A, B, and C.
  • If accruals were to be paid in BC and you wanted to do a performance calculation for the period AB and include (a portion of/all of) accruals that are to be paid in BC, but earned in AB, you would enter Accruals in AB and then enter Accruals Paid in a like amount in BC (or if paid in BC and C-D, etc., split and enter the correct amounts) which would adjust the accrual paid in BC (CD, etc.) by the amount taken in AB so as not to overstate/duplicate profit in BC (CD, etc.).
  • Should you decide to do a performance calculation for the period A-C, and you have applied Accruals in period AB with balances appearing in PerfCalc @ Accruals Outstanding until paid) and Accruals Paid (to the extent paid will reduce Accruals Outstanding) in BC, PerfCalc will calculate the analysis range profit and performance correctly; the same as if you had not made any accrual type entries at all.

8: Fees

 

Advisor Fees Taken and Advisor Fees Paid PerfCalc Types


Advisor Fees Taken

  • Advisor fees that were paid from the account.
  • If Fees were paid from the account, it is presumed that the ending Market Value includes the deduction.
  • For this reason there is no need to make a Fee entry for performance calculation purposes.
  • The exception being; to generate a Gross of Fees/No Fees report, an Advisor Fees Taken entry is required.
  • If you want to have Advisor Fees appear in a report, even if you do not want to generate a no fees report, enter a dated Advisor Fees Taken in the amount of the Fee.
    • This entry is a line item entry only; does not affect the performance calculation because fees have already been deducted from the EMV.

Advisor Fees Paid

  • Advisor fees that were paid directly from the client to the advisor; never went through the account.
    • In this case, Fees are not reflected in the EMV (because they did not pass through the account) and profit has to be reduced by that amount by reducing the ending market value MV by that amount.