Implementation

In 2010, our team embarked on a transformative journey to revolutionize investment performance measurement and attribution analysis for one of top 4 national banks in Australia. Working alongside renowned industry expert and author of a popular book on Investment Performance Measurement, we implemented Eagle’s Performance product to address critical calculation gaps and introduce sophisticated attribution capabilities.

Performance Calculation Enhancement

The legacy system’s limitations became apparent through several critical issues:

  • Incorrect holiday return calculations
  • Missing inter-period cash flow impacts
  • Inability to handle complex fee structures
  • Limited attribution analysis capabilities

Our solution introduced sophisticated methodologies:

Time-Weighted Return Calculations

  • Daily return computation with geometric linking
  • Modified Dietz methodology for cash flow weighting
  • True time-weighted return calculations
  • Holiday calendar integration for accurate day count

Fee Structure Implementation

  • Gross return calculations
  • Management fee integration
  • Performance fee considerations
  • Tax impact analysis
  • Vehicle-specific fee handling:
    • Mutual Funds and Classes
    • Separate Accounts
    • Collective Investment Trusts
    • Limited Partnerships

Attribution Analysis Framework

The second phase focused on comprehensive attribution analysis:

Equity Attribution

  • Security Selection Impact
    • Stock-specific return
    • Position weight effect
    • Interaction effect
  • Geographic Analysis
    • Country allocation
    • Regional contribution
    • Market impact
  • Risk Factor Decomposition
    • Beta analysis
    • Style factor attribution
    • Risk-adjusted performance

Fixed Income Attribution

  • Duration Effect
    • Yield curve positioning
    • Curve shift impact
    • Roll-down return
  • Spread Analysis
    • Sector allocation
    • Credit spread effect
    • Quality contribution
  • Currency Impact
    • Exchange rate effect
    • Hedging contribution
    • Cross-currency basis

Performance Analytics Innovation

Key technical innovations included:

  1. Cash Flow Handling
    • Intraday transaction timing
    • Fee accrual methodology
    • Dividend reinvestment impact
    • Corporate action processing
  2. Benchmark Integration
    • Custom benchmark creation
    • Blended benchmark handling
    • Index rebalancing impact
    • Target weight tracking
  3. Attribution Decomposition
    • Top/bottom contributors
    • Sector attribution
    • Currency effect isolation
    • Risk factor decomposition

System Architecture

The implementation leveraged Eagle’s robust architecture:

  • Daily return calculation engine
  • Multi-currency support
  • Complex fee handling
  • Flexible attribution models
  • Custom report generation

Results

The project transformed performance measurement capabilities by:

  1. Ensuring accurate holiday returns
  2. Incorporating all cash flow impacts
  3. Supporting complex fee structures
  4. Enabling detailed attribution analysis
  5. Providing flexible reporting options

The new system delivered significant improvements:

  • 99.999% calculation accuracy
  • 75% reduction in processing time
  • 100% holiday calculation accuracy
  • 90% automation of manual processes
  • Real-time performance analytics

The collaboration with a leading authority on the subject ensured adherence to industry best practices and introduced innovative approaches to performance measurement and attribution analysis. The system continues to serve as a cornerstone for investment performance analytics, providing accurate, timely, and comprehensive performance insights across diverse investment strategies and vehicles.