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What has the fund manager done for me? A value-based approach
to investment performance measurement

Gordon Bagot and Seth Armitage


In many circumstances it is unsatisfactory to measure portfolio performance
using time-weighted rates of return. There are well known problems with
performance attribution analysis using time-weighted returns in a multi-interval
context, and it is impossible to measure the contribution of a portfolio's manager
to the wealth of an individual investor. This paper shows that measurement of
outcomes in terms of value solves the problems of multi-interval attribution analysis
and enables precise customised assessment to be made of the manager's
contribution for each investor. Working with values is also simple and transparent.