Clarity, simplicity, coherence
To follow is an illustration of the eye-opening insights that FAAR℠'s analytical formulation can uniquely deliver.
Begins with a bird's eye-view of how all the assets and liabilities that define a Fund's financial position changed from transactions and events occurring in a reporting period -
- From buying, holding, and selling investments
- Reporting gains on transactions and events that cause increases in NAV and ROR
- Reporting losses on transactions and events that cause decreases in NAV and ROR
- From capital inflows and outflows
- Where applicable, from borrowing and repayment activities with creditors
Making use of this bird's eye-view, the transactions (or "happenings") of a Fund are framed into a plot that is succinct, easy-to-digest, and easy-to-relay
Making use of this bird's eye-view financial performance can be understood in the fundamental terms of Income and Capital Appreciation and how they were generated
- By Buying and Holding investments
- By Selling investments
- By Operating the Fund
Yielding a FAAR-Deeper℠ understanding
Even greater insight can be had by superimposing on such Fund ROR attribution, a break-out by asset class,
by Geography,
by Industry,
or by any other attributes that an investment manager finds relevant. Drill-down capabilities can trace any of these attributions to the underlying instrument(s) and transaction(s).
FAAR unabashedly borrows variance reporting concepts from the management accounting discipline to better understand and explain increases and decreases in P&L amounts and balance sheet balances. In the context of Interest Income, such an analysis would answer the simple question "How much of the difference is from having invested more (less), from having invested longer (shorter) and from having earned at a higher (lower) rate?”
Getting to A faar-Better℠ end
Determining which investment opportunities to engage in and which ones to disengage from (and when to do so) is necessarily an intricate undertaking that requires the intellect and hard work that investment managers provide. Understanding what has actually occurred in an investment fund should not be, and really is not, so complicated. Straightforward questions from investors, auditors, and investment overseers regarding what has already happened merit clear-cut answers...plain and simple. You just have to speak the right language...and have a story to tell.
At FAAR℠, we make our livelihood telling simple, meaningful stories. We have been able to glean such stories from the "books and records" where others are not able to do so because we tell the story in a language that is intrinsically based in fair values, not a fair-value story told in a cost basis lingo. We also avail ourselves of tools proven in established accounting and reporting disciplines but, up to now, have seldom been applied in the world of investments funds. FAAR℠ tells meaningful stories so that investment managers can bring their investors to a FAAR-Better℠ end.