Welcome to the third in our series of industry content from Panoramix designed to help advisors succeed in a more challenging operating environment.

As one of the more common processes developed in advisory firms, there is a high level of interest by both advisors and clients in how investment performance is actually calculated. While it seems straightforward in determining the ups and downs of a portfolio, there are quite a bit of assumptions and factors that take into consideration; time periods, account values, deposits/withdrawals, as well as the actual performance of the underlying investments in a portfolio.

On the surface, it may seem straightforward in how these calculations are developed, however, there are often many areas and methods that are not as understood and can become a source of confusion as advisors select a method for providing this critical information to clients, regulators and other industry bodies such as GIPS. In order to provide a detailed reference for the methods of calculating performance, this latest report will examine the different methods of computing portfolio performance, and some of the pros and cons of each method. There is no “right” choice for how you compute performance, but advisors should be familiar with the different methods so they can adequately defend their choices.