Date May 17, 2024
Please note that Peer Group Analysis is currently only available in Studio and Report Lab. To access Studio or Report Lab, please reach out to your Client Solutions representative. Additional fees apply.
What is Peer Group Analysis and how is it helpful?
Venn’s Peer Group Analysis enables users to evaluate managers’ historical performance relative to an investment peer group based on your preferred asset class or strategy. For each subject investment, the Peer Group Analysis block shows the actual values of the select metrics as well as the percentile ranks of each subject within the select peer group. Venn also provides the total number of investments in the peer group used for the analysis as well as the value of each metric at the 5th, 25th, 50th, 75th and 95th percentile levels for the peer group.
Peer Group Analysis helps contextualize a manager’s risk and returns to better understand how relatively well or poorly the manager performed. For example, a large cap domestic equity manager might have had strong performance in the last year, but all other managers in the same peer group also may have realized large positive returns as well, revealing that this particular manager actually underperformed most other funds in the selected Morningstar category.
What peer groups are available in Venn and how are they created?
Peer groups currently available in Venn are based on Morningstar’s category classifications, and cover public funds (e.g. mutual funds) and ETFs only. Please note that Venn does not separate out the categories based on vehicle type.
Peer groups can be searched for in the search modal that pops up after clicking the “Select Peer Group” button in the block configuration panel. This list should also match the full list of Morningstar Category filters available in the Data Library.
Note that peer groups represent Venn’s Data Library filtered by the category data provided by Morningstar, meaning the peer groups are only comprised of funds that are available in Venn’s Data Library at the time an analysis is run. As such, the peer group data will not 1:1 directly match Morningstar’s Peer Groups.
Can I create a custom peer group or make changes to an existing peer group?
Currently, Venn does not offer custom peer groups nor the ability to add or remove investments from an existing peer group.
Where can I find Peer Group Analysis?
Peer Group Analysis can be added to your report by selecting the “Peer Group Analysis” block under the Performance & Risk section of the Insert tab in Studio or Report Lab.
What formats is the Peer Group Analysis data available in?
Venn offers two different chart formats: a box and whiskers chart and a stacked bar chart. The box and whiskers chart shows the spread of each metric within the peer group and where each investment fits within that spread. This chart format could be helpful for comparing the same metric over different time horizons (e.g., comparing trailing 1, 3, 5 year returns). The stacked bar chart plots each investment’s percentile rank within the peer group, and can be helpful for comparing multiple metrics that typically scale differently side by side (e.g. compare 1 year returns, volatility and sharpe). Users can change the chart format by selecting the preferred option under the “Format” section of the block configuration panel.
In addition to the chart visualization, the Peer Group Analysis block also includes a table, which displays the value of the metrics and the corresponding percentile ranks for each subject as well as information about the peer group (number of investments and metric values at various percentile levels).
Can I see the list of funds in a given peer group?
You can see the full list of investments included in a peer group by clicking on the hyperlink under the “# of Investments” column in the peer group search modal. Venn will redirect you to the Data Library with the category filter applied.
Alternatively, you can navigate to Venn’s Data Library > All Filters and Queries > Morningstar Category and select the peer group category for which you want to see the underlying investments. Click “Apply” and the Data Library will be filtered to show all the investments in the category.
Where can I find what peer group a particular fund is part of?
You can confirm what peer group a particular fund belongs to by navigating to the investment’s Manage Data Page and referring to the “Morningstar Category” section of the Investment Information tab.
How are percentile ranks calculated?
Some funds within a peer group can have multiple different share classes. Rather than giving equal weight to each share class, Venn uses fractional ranking, where each share class of the same underlying fund is considered a fraction of a fund. This approach ensures that funds with multiple share classes do not get more weight in aggregate compared to funds with fewer or single share classes.
The fractional weight is determined by the number of share classes available for which a chosen metric is available. For example, if you are looking at trailing 5 year returns, and a fund has four share classes with a 5 year return and one share class with only a 3 year return, the four share classes with the 5 year return available will be given a weight of 0.25 each. The share class with only a 3 year return will not be included as part of the analysis for this specific metric.
Sample Fractional Weight Assignment
Once weights are assigned, investments within the peer group are sorted either in ascending or descending order, depending on the metric. Next, cumulative weights are computed by summing up the fractional weights. For the first investment, the cumulative weight is equal to the investment’s fractional weight. The next investment’s cumulative weight is equal to its fractional weight added to the cumulative weight of the previous investment, and so on. Note that if several investments are different share classes of the same fund and also have the same returns (or whichever metric that is being compared), the cumulative weights of all of the share classes are equal to that of the first share class, as indicated in blue in the example below. For example for Fund 1 - Share Class B, the cumulative weight is not 1 (0.75 + 0.25), and instead is replaced with 0.75, which is equal to the cumulative weight of Fund 1 - Share Class A.
Sample Percentile Rank Calculation
Percentile rank is calculated using this cumulative weight, based on the formula below.
Note, a percentile rank of 0 is replaced with 1.
Can I select subject investments that are not part of the peer group I’ve chosen?
Yes, you can select any subject investments to use for Peer Group Analysis, including investments that aren’t originally in the chosen peer group or investment returns you’ve uploaded. Venn will add the subject investments into the chosen peer group for computing the percentile ranks and the peer group information.
How does Venn handle survivorship bias?
Survivorship bias occurs when analysis of historical fund performance is skewed due to only considering existing funds instead of also including funds that have been liquidated. By excluding the liquidated funds, the analysis may not reflect an investment’s performance relative to all competitors that were around at a certain time period.
For a given metric and date range, Venn uses all investments in a given peer group that have the data available for Peer Group Analysis. For example, if a fund has a 10 year track record before liquidating in 2020, this fund would not be included for Peer Group Analysis looking at trailing 1 year or 3 year returns as of 2024 as it would not have returns available. However, this fund would be included for Peer Group Analysis looking at calendar year 2018 or 2019 returns or trailing 1 year and 3 year returns as of 2020.
As such, peer groups analyzed based on trailing performance (e.g., trailing 5 years as of today) are not free from survivorship bias, as they do not include funds that no longer exist. On the other hand, survivorship bias is mitigated for groups analyzed based on calendar years or as-of historical points in time, as all funds that existed at the time are included, even if since liquidated.
Why does an investment’s percentile or ranking change?
Percentiles and rankings within peer groups are displayed using data available in Venn’s Data Library at the time of analysis. As investment performance data changes, an investment’s percentile and rank can be expected to change. In addition, peer group analysis uses category information provided by Morningstar. If there are any changes to the chosen peer group (such as managers being added or removed, or other changes by Morningstar) the subject investment’s ranking and percentile, and those of other investments in the same peer group can be expected to change. Rankings and percentiles at the time an analysis is run can be preserved by exporting to PDF using Venn’s Report Lab capability. Please contact your Client Solutions specialist if you have questions about Report Lab.
Can I rank metrics relative to each investment’s specific benchmark?
Currently, Venn’s Peer Group Analysis only supports comparison of relative to benchmark metrics against a common benchmark.
What happens if I have proxies applied to some of the investments?
For subject investments, any proxies applied (desmoothing, interpolation, extrapolation, backfill, etc.) will be taken into account when computing the investments’ risk and returns and its relative ranking within the peer group.
For investments in the peer group, any proxy settings applied will be ignored and only the original returns will be used for the risk and return metrics and ranking computations.
This document highlights certain aspects of this feature. As an overview, it does not discuss all material facts or assumptions. Please seeImportant Disclosure and Disclaimer Information.