Composite Definitions

Composites in Performance Watcher 3.0 allow wealth managers to aggregate multiple portfolios that share similar characteristics (risk, currency, or mandate) into a single representative benchmark. This provides a clearer view of strategy performance and facilitates peer comparisons across the PW community.

Purpose

• To create meaningful, GIPS-aligned benchmarks that reflect real investment strategies.

• To allow objective, comparable performance reporting without cherry-picking portfolios.

• To enable automated daily performance tracking and community-wide indices.

Types of Composites

1. Automated Composites

• Definition: System-generated composites built from fixed, immutable rules:

  • Discretionary accounts only

  • Single currency and single risk level

  • Minimum portfolio value of $50,000

  • Equal-weighted calculation

• Purpose: Provides daily, standardized performance data automatically.

• Context:

  • Forms the basis for Performance Watcher Indices (PWI, PWI+), which benchmark community performance.

  • Used internally for peer comparison and risk-return analysis.

  • Cannot be altered manually, ensuring full transparency and fairness.

2. Bespoke Composites

• Definition: Manually constructed composites, allowing more customization than automated ones.

• Customization Options:

  • Investment clusters

  • Portfolio size thresholds

  • Specific relationship managers or supervisors

  • Discretionary and non-discretionary accounts

• Methodology:

  • Equal-weighted performance

  • Daily outlier cleaning using inter-decile filtering

• Purpose:

  • Enables internal analysis tailored to specific management teams or strategies.

  • Used for internal supervision and reporting, not for official indices unless made compliant.

Use in Indices (PWI+)

• Automated composites serve as the building blocks for the Performance Watcher Index (PWI and PWI+).

• PWI+ aggregates these composites daily, applying outlier cleaning and ecosystem weighting to provide:

  • Peer group performance benchmarks

  • Risk-return indices for each currency and risk level

• Goal: To create objective, community-based indices that reflect real-world discretionary portfolio management.

Benefits of Composites

• Facilitates peer benchmarking against real discretionary portfolios.

• Provides objective indices for goal setting and risk monitoring.

• Ensures compliance and fairness in public performance presentations.

• Automates reporting, avoiding manual Excel-based aggregation.