Published May 8, 2023. Holdings, weightings, and views may have changed since this article was written.
When I started this firm, I used an external vendor (YCharts) to measure the performance of our investment strategies. This worked well for us at the beginning, but as the firm has grown, it became clear that this was sub-optimal.
I had to perform numerous manual data transfer operations each month in order to produce our performance numbers. And with each passing month, I became more and more concerned that these operations were introducing errors into our reported results.
This isn’t so relevant for our existing clients. They have always had access to accurate, up-to-date performance information calculated by Altruist, our custodian.
But it’s important to me (and our regulators) that prospective clients have access to accurate, timely information about our investment strategies. So as of today, I’m making a material change to the way we measure and present our investment performance. You can read more about our specific approach on our Performance Methodology page.
Benchmark Selection
We compare our Growth Strategy against the MSCI ACWI (Net) Index, which represents broad global equity markets. Our Income Strategy is compared against a 60/40 blend of the Bloomberg US Aggregate Bond Index and the MSCI ACWI Index.
These benchmarks provide context for market conditions but do not reflect the 1% advisory fee or the specific ethical constraints of our process.
Please note that this change is only applicable to the performance we show publicly for each of our strategies. If you’re a client, the most accurate performance information will always be available to you directly through the Altruist web portal or app.
What’s changing?
Each of our strategy pages now shows the performance for an actual fee-paying account that has been invested in that strategy since its inception instead of a calculated value.
Why are you making this change now?
Our recent hire has allowed me to spend additional time auditing our internal processes. I identified a deficiency in our existing approach and moved to correct it.
How significant is this change?
It’s significant. We are discontinuing the practice of reporting on our real estate strategy, and restating the historical performance of our other two strategies.
The table below shows the cumulative performance of our Ethical Growth strategy calculated under the new methodology and the old methodology from October 2021 through March 2023, when the old methodology was discontinued for this strategy. Both the new and old calculations include all applicable fees.
| New Calculation | Old Calculation | Benchmark |
|---|---|---|
| -5.76% | -6.09% | -6.91% |
Performance of the Ethical Growth strategy from Oct 2021 to March 2023
The change also applies to our income-focused portfolio. Please note that this table covers a different time period than the one above. I’ve included returns from the benchmark in these periods in the hopes that it better calibrates your understanding.
| New Calculation | Old Calculation | Benchmark |
|---|---|---|
| 7.05% | 4.77% | 2.18% |
Performance of the income strategy from May 2022 to Jan 2023
I would not presume to decide whether this change is significant on your behalf. Instead, I’ve presented the old and new calculations for each month of each strategy at the end of this post. And like, created a whole blog post about it so that you can dig into the reasoning, examine the practical implications, and decide whether or not to move on with your life.
Will the way investment performance is calculated change again?
Over time, I hope to converge the approach we use with the Global Investment Performance Standards (GIPS) promulgated by CFA Institute. I used to work at that organization, and can probably imagine that I continue to hold its standards in high regard.
If I see an opportunity for us to move towards compliance with these standards without compromising our ability to accept clients with no investment minimum, I will seize it. However, in the meantime I have attempted to strike a practical balance between complexity, accuracy, and timeliness.
I’ve got questions about this. What should I do?
Reach out to me directly. You can send an email or schedule a meeting and I’m happy to walk through any of this.
Ethical Growth Strategy
| Period | New Way | Old Way | Difference |
|---|---|---|---|
| Oct 2021 | 9.72% | 7.35% | 2.37% |
| Nov 2021 | -4.68% | -0.57% | -4.11% |
| Dec 2021 | 0.69% | -1.58% | 2.27% |
| Jan 2022 | -13.22% | -13.92% | 0.70% |
| Feb 2022 | -3.38% | -0.42% | -2.96% |
| Mar 2022 | 3.62% | 0.73% | 2.89% |
| Apr 2022 | -11.52% | -10.97% | -0.55% |
| May 2022 | -0.75% | 0.27% | -1.02% |
| Jun 2022 | -3.72% | -6.08% | 2.36% |
| Jul 2022 | 14.21% | 16.64% | -2.43% |
| Aug 2022 | -4.61% | -4.04% | -0.57% |
| Sep 2022 | -7.28% | -8.19% | 0.91% |
| Oct 2022 | 4.19% | 5.24% | -1.05% |
| Nov 2022 | 10.44% | 10.61% | -0.17% |
| Dec 2022 | -4.88% | -4.91% | 0.03% |
| Jan 2023 | 9.21% | 8.37% | 0.84% |
| Feb 2023 | 0.28% | -0.35% | 0.63% |
| Mar 2023 | 0.61% | 0.53% | 0.08% |
New and old performance measurement methods applied to the Ethical Growth strategy, Oct 2021–Mar 2023.
Income Strategy
| Period | New Way | Old Way | Difference |
|---|---|---|---|
| May 2022 | 0.58% | 0.47% | 0.11% |
| Jun 2022 | -3.82% | -6.37% | 2.55% |
| Jul 2022 | 7.56% | 9.41% | -1.85% |
| Aug 2022 | -4.87% | -4.56% | -0.31% |
| Sep 2022 | -9.28% | -10.13% | 0.85% |
| Oct 2022 | 4.71% | 4.50% | 0.21% |
| Nov 2022 | 9.54% | 10.21% | -0.67% |
| Dec 2022 | -4.51% | -4.89% | 0.38% |
| Jan 2023 | 8.84% | 8.35% | 0.49% |
New and old performance measurement methods applied to the income strategy, May 2022–Jan 2023.