SD-09.1 — Performance Measurement

Business Domain: BD-09 Performance & Analytics (Middle office) · Applies: BOTH

Purpose

Calculates investment return — at instrument, holding, portfolio and total-fund level. Performance Measurement is the foundational analytics capability: it turns the raw record of what was held, what it was worth, and what cash moved (E-04, E-07, E-06) into a return figure. Every other domain in BD-09 builds on the numbers this one produces. It is the general return-calculation capability, applying across every asset class; the private-markets-specific metrics and methods are SD-09.8.

Service Operations

• Calculate time-weighted return — the return that removes the effect of external cash flow timing; the basis for comparing a portfolio against a benchmark and against peers.
• Calculate money-weighted return — the internal rate of return on the dated cash-flow series; the investor’s actual experienced return wherever external cash-flow timing matters, and the standard performance basis in private markets.
• Strike period returns — daily, monthly, quarterly, year-to-date and since-inception returns, by linking sub-period returns.
• Compute gross and net returns — return before and after management fees, performance fees and expenses.
• Compute composite returns — the asset-weighted return of a defined group of portfolios run to one strategy.
• Apply currency treatment — convert and, where a hedge applies, decompose local-currency, currency and hedged return.
• Reconcile return to the book of record — confirm the calculated return ties to the change in value and the cash flows recorded in the IBOR/ABOR.

Inputs and outputs

• Inputs: holdings and their values over the period; the dated cash-flow series; portfolio definitions; fee terms (for net-of-fee return).
• Outputs: return figures at every level — instrument, holding, portfolio, composite, total fund — over every period. These feed SD-09.2 (attribution), SD-09.3 (appraisal), SD-09.6 (GIPS), SD-09.8 (private-markets analytics), SD-13.10 (reporting), and the governance and IR domains.

Entities

• Consumes: E-04 Holding / Position (book = abor — performance measures realised return from the accounting book), E-06 Cash Flow Event, E-07 Valuation (any method), E-03 Portfolio / Mandate; for private markets PM-07 Capital Call and PM-08 Distribution (the cash-flow legs of money-weighted return); FO-05 Fund Distribution Event (the income-return leg of total return for an open-ended fund — the declared distribution per unit reduces the NAV on the ex-date and must be accounted for alongside NAV movement when calculating total return; income return = distribution / prior NAV per unit at the class grain); FO-06 Fee Accrual (the net_charge amount by fee_type — the fee deduction used when computing net-of-fee return; gross return minus the accrued and booked fee charge gives the investor’s net return for the period).
• Owns: E-20 Performance Result — the stored, append-only return figure with its inputs, methodology version and gross/net basis. Parallel in shape to E-19 Risk Measurement. A return definition is a metric in the semantic layer (the Metric Definition E-22, SD-13.8); a return result is stored, with provenance, so GIPS verification and audit can answer it from a record rather than a recomputation. SD-09.1 produces the figure from the Valuations (E-07) underlying the period and references the Metric Definition (E-22) it was computed to.

Standards

• GIPS (Global Investment Performance Standards, CFA Institute) — the calculation-methodology rules Performance Measurement must conform to where the firm claims GIPS compliance; governed by SD-09.6.
• Time-weighted and money-weighted return are the industry-standard return definitions; the money-weighted figure is the IRR that SD-09.8 extends for private markets.

Open extensions

• The Service-Operation-level input/output contracts.
• Performance attribution as a sub-structure or related entity to E-20 — the decomposition of a return into allocation, selection and currency effects.