Currency Overlay in Performance Evaluation

The aim of performance evaluation is to make judgments about the success of portfolio managers in asset allocation and security selection for investment portfolios. This article presents a method of performance measurement that uses the interdependence of market management and currency management in terms of allocation processes but allows their separation in terms of selection processes. As a consequence, performance evaluation is more reasonable than in previous approaches and produces the same results whether the investment process starts with market management followed by currency management or vice versa.