Wilshire Mutual Fds, Inc. Wilshire Large Company Value Portf Inv Cl · NASDAQ:DTLVX
Wilshire Mutual Fds, Inc. Wilshire Large Company Value Portf Inv Cl — Wilshire Associates — Technical Presentation (February 2009)
83 slides from Wilshire Mutual Fds, Inc. Wilshire Large Company Value Portf Inv Cl's technical presentation, Feb 26, 2009
Slide 1: Performance Attribution for Fixed Income Portfolios
Portfolio Analytics Risk Management Performance Attribution Scenario Analysis and Stress Testing What If Trade Analysis Performance Attribution for Fixed Income Portfolios February 26, 2009 THE WILSHIRE AXIOM PAGE 1
Slide 2: Executive Summary
Executive Summary Fixed income returns based performance attribution models offer simplicity, ease of implementation and interpretation by attributing active return to weighting, duration or yield differences and security selection effects on a Basic Returns Variance algorithms group by group basi
Slide 3: Duration/Allocation/Selection Report
Duration/Allocation/Selection Report The Duration/Allocation/Selection performance attribution framework d decomposes nett return t between b t a portfolio tf li andd a benchmark b h k tto relative l ti duration return, weighting, security selection and currency effects on a group by group basis THE
Slide 4: Table 1: Starting Group Level Allocations
Table 1: Starting Group Level Allocations THE WILSHIRE AXIOM PAGE 4
Slide 5: Table 2: Starting Group Level Durations
Table 2: Starting Group Level Durations THE WILSHIRE AXIOM PAGE 5
Slide 6: Table 3: Group Level Base Returns
Table 3: Group Level Base Returns THE WILSHIRE AXIOM PAGE 6
Slide 7: Table 4: Group Level Attribution
Table 4: Group Level Attribution THE WILSHIRE AXIOM PAGE 7
Slide 8: Agenda
Agenda THE WILSHIRE AXIOM is an integrated global fixed income portfolio Performance Attribution and “Returns Based” management system for attribution analytics, risk management management, Basic allocation/selection attribution performance attribution, scenario Controlling for relative durati
Slide 9: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 10: Performance Attribution
Performance Attribution Performance attribution analysis explains the absolute return or net return of a portfolio versus a Filter skill from luck b benchmark h k iin tterms off components t relevant l t tto the th investment management decision process Communicate investment results to The Wils
Slide 11: Attribution Goals
Attribution Goals Performance attribution analysis is used to disaggregate the net return of a portfolio versus a b benchmark h k iinto t components t relevant l t tto th the Primary investment management decision process methodologies of performance Explain systematic returns in terms of known,
Slide 12: Returns Based Attribution
Returns Based Attribution Standard Attributes Returns based attribution seeks to understand the relative return between a portfolio and benchmark in Benchmark return in a t terms off two t dimensions di i group One dimension decomposes the total return in Duration return the portfolio and benchm
Slide 13: Agenda
Agenda Performance Attribution and “Returns Based” attribution Allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms Cur
Slide 14: Allocation/Selection Attribution
Allocation/Selection Attribution Break down portfolio returns relative to a benchmark into management effects using only Very popular approach in the equity world returns t and d weights, i ht group by b group Effective for high yield If the portfolio investments within a group and EMD mandates,
Slide 15: Reconciliation: Adding it All Up
Reconciliation: Adding it All Up Just a small flavor of the basic type of calculation underlying group based RP RB wP , g RP , g wB , g RB , g attribution g Decompose portfolio and wP , g RP , g wP , g RB , g wP , g RB , g wB , g RB , g benchmark returns to weighted sums of r
Slide 16: "Interaction" Effects
“Interaction” Effects Sometimes a third term labeled “interaction” is presented, on the basis that the “pure” Selection Tracking these interaction effect should be measured as effects is a recurring theme in attribution Selection g wB , g ( RP , g RB , g ) analysis, and applies to currency att
Slide 17: Multicurrency Portfolio Returns
To handle currency, we introduce local returns by Multicurrency Portfolio Returns group and currency RP wP , g ,c ( RPl , g ,c c ,b RPl , g ,c c ,b ) The total return can be separated into local g ,c return and currency wP , g ,c RPl , g ,c wP , g ,c ( c ,b RPl , g ,c c
Slide 18: Allocation/Selection/Currency Model
To handle currency, we introduce local returns by Allocation/Selection/Currency Model group and currency The total return can be separated into local return and currency Applying the Allocation/Selection decomposition as return before to the local return component of the net Local return is extrac
Slide 19: Basic Allocation/Selection Attribution
Basic Allocation/Selection Attribution Wilshire Axiom has two reports that use Allocation of systematic and non-systematic effects Brinson-style attribution with flexible determined by flexible groupings grouping of management effects: Systematic return is defined by the benchmark total return R
Slide 20: Running an Allocation/Selection Report in Wilshire Axiom
Running an Allocation/Selection Report in Wilshire Axiom THE WILSHIRE AXIOM P A G E 20
Slide 21: Select Returns Variance Report
Select Returns Variance Report THE WILSHIRE AXIOM P A G E 21
Slide 22: Select Benchmark
Select Benchmark THE WILSHIRE AXIOM P A G E 22
Slide 23: Select Benchmark Hedging Options
Select Benchmark Hedging Options THE WILSHIRE AXIOM P A G E 23
Slide 24: Select Report Format
Select Report Format THE WILSHIRE AXIOM P A G E 24
Slide 25: Select or Edit Report Format Parameters
Select or Edit Report Format Parameters Report format options will be discussed in more detail in later slides THE WILSHIRE AXIOM P A G E 25
Slide 26: Allocation/Selection Report Summary Page
Allocation/Selection Report Summary Page The Allocation/Selection performance attribution framework decomposes nett return t between b t a portfolio tf li and dabbenchmark h k tto relative l ti allocation, ll ti security selection and currency effects on a group by group basis THE WILSHIRE AXIOM P A
Slide 27: Percent Invested Snapshot
Percent Invested Snapshot THE WILSHIRE AXIOM P A G E 27
Slide 28: Base Currency Returns By Group
Base Currency Returns By Group THE WILSHIRE AXIOM P A G E 28
Slide 29: Attribution Table
Attribution Table THE WILSHIRE AXIOM P A G E 29
Slide 30: Selection Calculation
Selection Calculation For this case, simply multiply the portfolio invested weights with base return differences to reconcile Selection E.g., 21.782% x 0.921 = 0.201 THE WILSHIRE AXIOM P A G E 30
Slide 31: Allocation/Selection Report Summary Page
Allocation/Selection Report Summary Page Invested weight difference x (benchmark return in group – benchmark total return) = Allocation E.g., -14.144 x (2.494 – (-0.802)) = 0.239 THE WILSHIRE AXIOM P A G E 31
Slide 32: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 33: Beyond Allocation/Selection/Currency
Beyond Allocation/Selection/Currency For many fixed income settings, the allocation/selection/currency y framework is simply py inadequate The A/S/C framework does not capture the fact that a Allocation/Selection portfolio can be overexposed to a group on a and Yield/Allocation/ duration or yiel
Slide 34: Duration/Allocation/Selection Model
Duration/Allocation/Selection Model THE WILSHIRE AXIOM P A G E 34
Slide 35: Duration/Allocation/Selection Attribution
Duration/Allocation/Selection Attribution Global sovereign The Duration/Allocation/Selection framework curves and U.S. municipal curve measures the magnitude g of the p parallel shift in the effects are yield curve for each yield curve to which the portfolio automatically or benchmark is exposed:
Slide 36: Treasury Universe Selection for Shift Size Measurement
Treasury Universe Selection for Shift Size Measurement THE WILSHIRE AXIOM P A G E 36
Slide 37: Benchmark Selection Interface (1)
Benchmark Selection Interface (1) Se ec the Select euuniverse e se oof bo bonds ds too use to o ca calibrate b a e the e magnitude ag ude o of the parallel shift used in duration return measurement The universe can be a benchmark, portfolio or a universe of bonds screened interactively from the data
Slide 38: Benchmark Selection Interface (2)
Benchmark Selection Interface (2) Available index families in Wilshire Axiom THE WILSHIRE AXIOM P A G E 38
Slide 39: "Use Only TREA" Check Box
“Use Only TREA” Check Box Sometimes it is convenient not to drill down through the benchmark interface to find the sovereign sub-indexes of the desired index family—this check box a tomaticall overlays automatically o erla s that screen THE WILSHIRE AXIOM P A G E 39
Slide 40: Duration/Allocation/Selection Report
Duration/Allocation/Selection Report The Duration/Allocation/Selection performance attribution framework d decomposes nett return t between b t a portfolio tf li andd a benchmark b h k tto relative l ti duration return, weighting, security selection and currency effects on a group by group basis THE
Slide 41: Table 1: Starting Group Level Allocations
Table 1: Starting Group Level Allocations THE WILSHIRE AXIOM P A G E 41
Slide 42: Table 2: Starting Group Level Durations
Table 2: Starting Group Level Durations THE WILSHIRE AXIOM P A G E 42
Slide 43: Table 3: Group Level Base Returns
Table 3: Group Level Base Returns THE WILSHIRE AXIOM P A G E 43
Slide 44: Table 4: Group Level Attribution
Table 4: Group Level Attribution THE WILSHIRE AXIOM P A G E 44
Slide 45: Duration Effect
Duration Effect The Duration attribute is calculated as the portfolio invested weight times the net return from duration within each group, weighting different currencies using the benchmark weights I.e., it is a “pure” duration effect THE WILSHIRE AXIOM P A G E 45
Slide 46: Duration Weight Effect
Duration Weight Effect The Duration Weight attribute is calculated as the product of the net weight in each group with the excess benchmark duration return within the group: The first summation ranges over exposures to currencies within the group g; the second summation ranges over all groups and cu
Slide 47: Allocation, Selection and Currency Effects
Allocation, Selection and Currency Effects Nett return N t in i excess off Duration D ti and d Duration D ti W Weighting i hti isi attributed tt ib t d iin tterms of the standard Allocation, Selection and Currency framework Similarly, y, for the Yield/Allocation/Selection and Treasuryy Equivalent q
Slide 48: Yield/Allocation/Selection Report
Yield/Allocation/Selection Report The Yield/Allocation/Selection performance attribution framework d decomposes nett return t between b t a portfolio tf li and d a benchmark b h k tto relative l ti yield return, allocation, security selection and currency effects on a group by group basis THE WILSHI
Slide 49: Table 1: Group Level Allocation
Table 1: Group Level Allocation THE WILSHIRE AXIOM P A G E 49
Slide 50: Table 2: Group Level Yields
Table 2: Group Level Yields THE WILSHIRE AXIOM P A G E 50
Slide 51: Table 3: Group Level Returns
Table 3: Group Level Returns THE WILSHIRE AXIOM P A G E 51
Slide 52: Table 4: Group Level Attribution
Table 4: Group Level Attribution THE WILSHIRE AXIOM P A G E 52
Slide 53: Yield Effect
Yield Effect The Yield Return (as shown here) attribute is calculated as the portfolio invested weight times the net Yield Return plus the product of the net weight in each group with the excess benchmark Yield Return for the group I.e., it consolidates the pure and interaction Yield Return effects
Slide 54: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 55: Treasury Equivalent Returns Model
Treasury Equivalent Returns Model Wilshire Axiom clients utilizing the returns based performance attribution models available under the Wil hi Axiom Wilshire A i Returns R t Variance V i reportt options ti now have an additional choice to attribute excess return over an “Equivalent Treasury” into
Slide 56: Treasury Equivalent Return Report
Treasury Equivalent Return Report The Treasury Equivalent performance attribution framework decomposes nett return t between b t a portfolio tf li anddab benchmark h k tto relative l ti T Treasury Equivalent return, allocation, security selection and currency effects on a group by group basis THE WI
Slide 57: Table 2: Treasury Equivalent Return
Table 2: Treasury Equivalent Return For each group the attribution algorithm constructs a hypothetical portfolio of 15 zero coupon bonds priced at a zero spread to the Treasury curve and cash cash, corresponding to 15 key rate maturities, so that the key rate durations of the actual portfolio or ben
Slide 58: Table 4: Group Level Attribution
Table 4: Group Level Attribution THE WILSHIRE AXIOM P A G E 58
Slide 59: Treasury Equivalent Return Effect
Treasury Equivalent Return Effect The Treasury Equivalent Return attribute is calculated as the portfolio invested weight times the net Treasury Equivalent Return plus the product of the net weight in each group with the excess benchmark Treasury Equivalent Return for the group I.e.,, it consolidate
Slide 60: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 61: Additive Versus Geometric Net Returns
Additive Versus Geometric Net Returns Net returns are typically quoted using one of two paradigms: While some commentators express very strong opinions about one Within a single return period, there is no substantive versus the other, they distinction between the two approaches are a fortiori eq
Slide 62: Geometric Returns Variance Models
Geometric Returns Variance Models E.g., all the Selection All the models/model formulae presented so far amounts across have been additive in the sense that the attributes groups add up to the add up to the total net return, and that the group- total Selection for the level attributes add up to th
Slide 63: Allocation/Selection in Geometric Form
Allocation/Selection in Geometric Form The intermediate portfolio Define RPaBr portfolio as the portfolio that matched idea used here reproduces the total level the portfolio allocations (weights) at the group level attributes for each group group, and the benchmark weights at the security level w
Slide 64: Additive Versus Geometric: Summary
Additive Versus Geometric: Summary Additive Net return = Sum of attributes Total Attribute = Sum of group level attributes Geometric Net return = Product of attributes Total Attribute = Sum of group level attributes THE WILSHIRE AXIOM P A G E 64
Slide 65: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 66: Linking Algorithms
Linking Algorithms Thus far the discussion has dealt exclusively with single period net return decompositions Typically attribution is run over periods during which portfolio and benchmark weights, durations, yields, etc., have not remained constant, and thus attribution methodologies need to be
Slide 67: Inductive Linking
Inductive Linking A single period attribution expresses the net return as a sum of group level attributes The excess portfolio return for this period is compounded with the accumulated portfolio returns for the prior periods Here a subscript t denotes an attribution for a single period t, and Aa
Slide 68: Geometric Linking
Geometric Linking Because total returns compound in time, and geometric linking is A single period geometric attribution expresses the formulaically similar to net return as a product of attributes, each of which compounding, many find it to be a compelling is a sum of group level attributes appro
Slide 69: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 70: Currency Hedging
Currency Hedging Currency forwards form a special case for treatment in attribution, both because they do not typically sort into the investable groups used in the attribution analysis and because their return is typically driven by different factors than those being analyzed by th attributes the
Slide 71: Agenda
Agenda Performance Attribution and “Returns Based” attribution Basic allocation/selection attribution Controlling for relative duration, term structure or yield effects Wilshire Axiom Treasury Equivalent Return calculation Geometric and arithmetic net return quotations Linking algorithms
Slide 72: Other Reporting Options
Other Reporting Options Easy, customizable grouping options Ability to pick secondary benchmark to use in computing selection effects for out-of- benchmark portfolio exposures Security detail section reconciles selection effect to summary page and can summarize by Issuer Link daily, monthly or on ch
Slide 73: Wilshire Associates Incorporated
Wilshire Associates Incorporated Providingg quantitative q financial analytics to Wilshire Associates is a leading global investment technology, investment consulting institutional investors: and investment management firm with four distinct business units including Wilshire Analytics, Wilshire Co
Slide 74: Wilshire Axiom Clients
Wilshire Axiom Clients Wilshire Axiom clients represent a broad Solution of choice spectrum of fixed More than 120 of the world’s world s income asset leading fixed income managers use Wilshire Fixed Income managers: Analytics Central banks Custodial banks Mutual funds Hedge funds Insuranc
Slide 75: Client Servicing Model
Client Servicing Model A Dedicated Relationship Manager The Wilshire Fixed Income Analytics Team Each client is assigned a dedicated Relationship Manager available for one- one on-one technical support, system maintenance and upgrades, training and regular visits at client’s site Research and Develo
Slide 76: The Wilshire Axiom System
The Wilshire Axiom System Wilshire Proprietar Proprietary Factor Risk Model Portfolio Analytics Performance Attribution Portfolio/Benchmark Variance Factor-based Ex-post analysis Cash Flow and Reporting Returns-based Unparalleled p in scope p 29 factors for U.S. only 450+ factors globally Wilshi
Slide 77: Wilshire Axiom API
Wilshire Axiom API Flexible reporting settings for customized and optimal presentation Unparalleled sorting and segmentation capabilities Portfolio and asset characteristics for more than 600 data items, including: The Wilshire Axiom APISM allows for Book value and yield automatic generation of cu
Slide 78: Database and Historical Data
Database and Historical Data Selected Data Providers Interactive Data The Wilshire Axiom database manages hundreds of ABS Bonds benchmarks, thousands of portfolios and more than Mortgages/CMO 5 1 million 5.1 illi fixed fi d iincome iinstruments, t t iincluding l di Municipals Preferred m
Slide 79: Asset Type Coverage
Asset Type Coverage 144A Bond Forward ABS (multiple) CDX Dedicated data model Alternative Asset CDO for each covered Bank Loan Credit Default Swap asset type fully Bond Currency Forward integrated into DERIVATIVES Cash Currency Future BONDS (Various) Commercial Paper Currency Option valuation analyt
Slide 80: Example of Next Steps
Example of Next Steps Wilshire Fixed Income Analytics’ Standard Process Client sends Wilshire Fixed Income Analytics (FIA) holdings of a selected portfolio for coverage Client and Wilshire FIA Risk Summary meeting: Risk Summary review and report, introduction to Wilshire FIA Relationship Manager
Slide 81: Contact Information
Contact Information Please contact me with any questions, or if you want additional information about Wilshire Axiom or the products/services offered byy Wilshire Fixed Income Analytics y Mark Lewis M Managing i Di Director t anddPPrincipal i i l Direct: 1.310.260.6688 Cell: 1.310.309.7315 Email:
Slide 82: Wilshire Fixed Income Analytics
Wilshire Fixed Income Analytics Mark Lewis, Managing Director and Principal – Head of Global Business Development and Global Client Relationship Management, FIA Mark Lewis joined Wilshire in 2006 and is based in the Santa Monica office. Prior to his current role, Mr. Lewis spent more than 18 years
Slide 83: Copyrights / Trademarks
Copyrights / Trademarks Copyright © 2009 Wilshire Associates Incorporated. All rights reserved. Information in this document is subject to change without notice. No part of this publication may be stored in a retrieval system, transmitted or reproduced in any way way, including but not limited to to
Wilshire Associates — Technical Presentation (February 2009) on 6ix