Performance Attribution – Securities Wrap

Did active outperform passive?

I benchmark myself against the Straits Times Index (STI index). The performance is net of fees and charges already. The securities wrap service has been around since August2015 and I archive data to analyse. Different clients incept their portfolios at different points in time and at different STI index levels.

The STI index consists of 30 large cap companies and the 3 banks (DBS, OCBC, UOB), along with Singtel already command about 12% of the index. First point to note is that this benchmark is not perfect simply because the holding’s of the individual portfolios don’t come close to any of the 30. However, that said, it serves to answer if active portfolio management beats passive ETF investing.

The answer to the question:

There are times where active beats passive and there are times the reverse is true.

So how did I go about the benchmarking? Well there is a start date and that’s when the STI level is benchmarked to the specific portfolio. Every month end, the percentage change between the two are calculated. If there are inflows and outflows during that month, an adjustment is made as well.

[ (Value1+outflowAMOUNT) – Value0 ] / Value0 x100%

That is how I will adjust outflows, where Values are the NAVs of the portfolios at time 1,0 respectively. If there is inflow, I simply subtract instead of add. In cases of inflow, I also position size weight the benchmark level. For simple example, if $25k started with 2800 STI Level and another $25k was injected at 3000 STI level, the benchmark is adjusted to 2900 STI Level.

Performance of the aggregate is the position size weightage of the performances of each securities wrap portfolio. Larger portfolios carry more weight naturally.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.