Single index benchmarks such as the S&P500 are widely used but often inappropriate for measuring performance. As an alternative, blended benchmarks provide an appropriate reference for manager selection and performance attribution. Read our whitepaper.
How can this be done in practice? With Portfolio Lab it is easy to build a blended benchmark.
What if you wish to backtest a portfolio for an extended period of time, but the portfolio contains one or more assets with short history, for example a mutual fund or ETF with recent inception date ?
Portfolio Lab offers an automated approach to handle this situation. Using a proxy (a similar asset or index), Portfolio Lab fills the missing price history of the asset so that it can be used in backtest. Whenever such backfill occurs, Portfolio Lab displays a message at the bottom of the backtest window:
In this example, two assets in the portfolio (BLV and VPCCX) do not have sufficient price history for the selected backtest length of 10 years. The backfill details can be viewed and changed by clicking on the Edit button:
- BLV – a bond ETF – only has history back to 2007 (shown in green.) Its price history is extended by using a bond index (shown in blue.)
- VPCCX – a fund primarily allocated in large caps – only has history back to 2005. Its history is extended using the S&P500 prices.
Portfolio Lab automatically selects a backfill index by looking up the biggest allocation class for the asset. For example, a mutual fund whose biggest asset allocation is mid cap is backfilled with a mid-cap index.
Changing the backfill selection
To assign a different index for backfill, click on this index. A menu appears with a choice of available indexes. Portfolio Lab will remember your selection for future sessions.
Kwanti will be at the FPA Experience conference in Orlando, Oct. 19 to 21.
Visit us on the exhibit floor, booth #719 where you can see demos and have a peak at our upcoming product enhancements!
Portfolio Lab for iPad is available to all Kwanti subscribers at no extra charge from Apple app store. With this application, you gain instant mobile access to your Kwanti portfolios and an elegant way to communicate with your clients!
As an institutional member of the Financial Planning Association, Kwanti welcomes FPA members and offers a 10% discount on subscriptions to Portfolio Lab.