Salt Creek Investors’ performance is the topic today. With the integration of Orion into our platform, we will be able to report performance for our models on a regular basis. Orion provides us with the capacity to report performance for SCI models and individual accounts for various timeframes. I checked my Emoney account last night and viewed monthly reports for January, February, and March. The presentation looks professional and is easily understood. Also contained in these reports is a volatility measure and a risk-adjusted measure (Sharpe ratio). Speaking of volatility, standard deviation is the metric we will be using to describe how dispersed the returns are. We look at standard deviation as the path taken toward the objective not the risk embedded in a portfolio. Risk is the assignment of a probability of not achieving an objective. The objective being driven by client goals either in relative or absolute terms.
We also will report a Sharpe ratio (SR) for our models. SR is a risk adjusted measure that describes how many units of return over the benchmark is being generated per unit of standard deviation. This metric for adjusting risk into a standardized measure is widely accepted in our industry and easily explained to your clients. One drawback is that it will not serve as a standalone measure. It is a comparative measure having very little value as a standalone metric. Other measures are available but we feel these are relevant to how our models are constructed.
Thank you to Bob Dunne and Mike Urban for their contributions in making performance reporting a part of our SCI platform.
Please feel free to send your comments to sci@lasallest.com.