ANALYSIS

Performance measurement challenges for investors who live in a perpetual time horizon world

Frederick Bruckner, vice president and the portfolio specialist group leader for Wachovia Securities’ Investment Management Consulting Group, in an article published by the Investment Management Consultants’ Association in New York, discusses the merit of using performance measurement statistics for endowments.

The investors’ time horizon is one corner stone of a well constructed investment portfolio. Time most certainly is on the side of nonprofit institutions such as endowments and foundations, given that they exist to provide support to their beneficiaries over extremely long time periods… So that begs the question: How relevant is the Sharpe ratio – the key
statistic used for measuring manager and composite portfolio performance – in the endowment and foundation world when the time horizon is in perpetuity?