I'm conducting a GIPS(R) (Global Investment Performance Standards) verification this week, and this morning, when I went into the hotel's concierge lounge, I overheard two women who were watching a discussion about the game on the television. The Seahawks' Richard Sherman was explaining some of the reasons his team prevailed; apparently the women were unimpressed. One remarked, regarding the Broncos, that "they were simply outplayed."
While no one can argue with such an observation, it lacks the specificity that many like to see. I recall how the Philadelphia Eagles' defensive coordinator, Jim Johnson, was credited with the team's success against the then Atlanta Falcon's (now Eagles') Michael Vick in the NFC Championship game in advance of Superbowl XXXIX. "Monday (and even "Tuesday") morning quarterbacks" aren't typically satisfied with "they were simply outplayed."
What insights can be shared that perhaps we weren't aware of? Did the team have a secret strategy to keep Peyton Manning in check (looked that way)?
Imagine if a portfolio manager were to explain why they failed to beat the benchmark with such brevity ("we were simply outperformed"). Chances are it wouldn't suffice. We want a more detailed assessment.
Attribution analysis, be it of an important (or even not so important) game is often expected, as well as with investing.
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Well said. And as in sports, you might want to ask the question: "Why do we present our analysis? Is it to evaluate performance, or to shift the blame?" You may have heard the expression: "Good stock picks or bad markets." We have all seen managers who claim credit for outperformance but blame poor performance on weak markets. Perhaps performance analysts (and investment managers) should be reminded that performance evaluation should do three things: 1) confirm that the strategy is being consistently employe, 2) identify and explain any unexpected results and 3) affirm the decision to hold/further evaluate/exit. This keeps everyone honest and focused on the goals of the asset owners.
ReplyDeleteThanks, Steve!
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