Performance measurement is perhaps the most visible and consistent aspect of a consultant's mandate. NEPC is the lead firm in a national coalition, the Independent Consultants Cooperative (ICC), a unique alliance of seventeen independent investment-consulting firms and State Street Bank.
The ICC Universe is easily the largest, most robust diagnostic universe in the industry, and is the backdrop for our Investment Performance Analysis (IPA) reports. Each client receives performance results, risk analyses, and comparisons for the total fund and all asset classes, capitalization ranges and style combinations. The reports show the returns earned by a program and its component managers and clearly isolate the sources of over and underperformance and the risk levels inherent in each manager's process. We compare structure to policy guidelines, and results to objectives. The reports are highly graphic and are customized to each client's requirements and fund structure. Monthly performance "flash" reports are also available.
We compare all returns to standard industry benchmarks, which are chosen to most closely match each manager's mandate and strategy. Nearly 500 standard market benchmarks are available, from all major vendors, and we often create custom benchmarks for our clients and incorporate them into our reports. In this way we isolate policy and structural decisions from manager contribution.
Performance relative to peers is identified through our universe comparisons. Because our primary universe is so large, we can "slice" it into subsets that generate diagnostics and comparisons beyond the reach of our competition. For example, we can provide endowment/foundation fund, public fund, Taft-Hartley fund, or corporate plan universe comparisons, and then drill down to examine performance and asset allocation by fund size with meaningful, robust sub samples. We classify equity portfolios by style (value, core and growth arranged by small, medium and large capitalization breakdowns) and can isolate portfolios within each market segment. Likewise, fixed income style groupings include core, core plus, intermediate, short, high yield and long. We also can monitor performance of each manager relative to its composite results and results achieved for other client accounts.
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