Investment Portfolio Performance - Financial KPIs Examples | Sisense (2024)

FAQs

What is the KPI of an investment portfolio? ›

What Does It Mean? The Performance Measures KPI for investment portfolios is a way to track how the value of your investments is responding to changes in the market, and how the value of your investments changes over time.

For purposes of measuring an investment portfolio's performance, the two most common rate of return methodologies are dollar-weighted and time-weighted return metrics. These two approaches are fairly similar but each tell a separate story and are appropriate to use in different situations.

A financial key performance indicator (KPI) is a leading high-level measure of revenue, expenses, profits or other financial outcomes, simplified for gathering and review on a weekly, monthly or quarterly basis. Typical examples are total revenue per employee, gross profit margin and operating cash flow.

Evaluating investment terms and agreements involves key performance indicators (KPIs) to assess returns and risks, like: • ROI: Measures profitability. NPV: Evaluates future cash flows. IRR: Assesses annualized return. Payback Period: Measures time to recover initial investment.

A benchmark is a standard or measure that can be used to analyze the allocation, risk, and return of a given portfolio. A variety of benchmarks can also be used to understand how a portfolio is performing against various market segments. The S&P 500 index is often used as a benchmark for equities.

Sharpe Ratio (after William Sharpe)

This is probably the most famous performance measure. When evaluating past performance, it is defined as: SR=¯rp-rfσp where rp, σp, and rf are the portfolio's return and standard deviation, and the risk free return over the sample period.

There are several ways to measure a portfolio's performance. Some of the most popular methods are the Sharpe, Jensen, and Treynor ratios.

Jensen's measure is one of the ways to determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with their stock-picking skills.

Definition: Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.

What are the 5 KPIs? ›

KPIs can be financial, including net profit (or the bottom line, net income), revenues minus certain expenses, or the current ratio (liquidity and cash availability). Customer-focused KPIs generally center on per-customer efficiency, customer satisfaction, and customer retention.

In the investment management industry, performance evaluation broadly refers to the measurement, analysis, interpretation, assessment, and presentation of investment results. In particular, performance evaluation provides information about the return and risk of investment portfolios over specified periods.

Indicators are statistics used to measure current conditions as well as to forecast financial or economic trends. In the world of investing, indicators typically refer to technical chart patterns deriving from the price, volume, or open interest of a given security.

A market indicator is a quantitative tool that is used by traders to interpret financial data in order to forecast stock market movements. Market indicators are considered a subset of technical indicators.

ROI, which stands for return on investment, and KPI, which stands for key performance indicators, are measurement tools that businesses use to gauge how successful they have been in achieving specific goals and objectives.

To achieve this goal, there are some Key Performance Indicators (KPIs) such as ROI and Payback, that give us a strategic view of profits and allow us to analyze which type of investment is bringing positive returns to the business.