A Practitioner’s Guide to Mandates, Performance, and What the Client Actually Earned
Julian R. Sterling
These are the four Excel workbooks that go with the book. Every figure the book prints is
reproduced in them by a live formula rather than a typed constant — change a benchmark
weight, a segment return, a cash flow or the fee schedule and every dependent number moves. Each
one ends with a Checks sheet setting the printed figure beside the computed one:
100 controls in all, every one green. If a control ever reads FAIL, the workbook
is wrong, not the book.
Free to download. No sign-up, no email address, nothing to fill in.
Everything described below is inside it, with the read-me.
The four workbooks
Chapters 1, 4, 5, 7 and 14
Marchwood — the four numbers
The four returns of the mandate computed from one set of inputs, with the benchmark beside
them: time-weighted gross 5.0887, time-weighted net 4.8012,
rolling three-year net 6.8290, money-weighted net 4.1272,
benchmark 4.7455. The spread of 2.7017 points and the ratio to the net
outperformance are live cells, not captions, so both move when you change an assumption.
Underneath is the engine the other three workbooks share: the annual returns built from five
segments rather than typed above them, and the account run year by year — flow, opening
value, value before fees, average assets, fee, closing value, net return. Edit a segment
weight and the terminal value of 549,908,879.55 moves, and so does every
headline number in the book.
The_Four_Numbers.xlsx · XLSX · 14 KB
Chapters 4, 5 and 14
Time-weighted and money-weighted
The chain-linking one year at a time, with the cumulative factor visible at each step and the
fifth root taken on the page, for the gross series, the net series and the benchmark. Beside
it, the arithmetic mean of the five years and the gap between it and the annualised return,
which is volatility drag rather than a rounding difference.
Then the scheme's own number: the cash-flow series solved for the rate that discounts it to
zero, 4.1272 per cent, with the discounting column shown so the solution can
be checked rather than trusted. The cash flows are inputs. Move the
120,000,000 out of Year 2 and the −180,000,000 out of Year 3 and watch the time-weighted
returns refuse to move while every money-weighted figure does — including the
6,357,745.18 the timing cost.
Time_and_Money_Weighted.xlsx · XLSX · 14 KB
Chapters 8, 9, 10 and 11
Attribution, and the risk measures
The Brinson decomposition written out segment by segment and year by year: allocation,
selection and interaction, each from its own formula, each with its five-segment column
showing where the number came from. The row that matters is the reconciliation, which
subtracts the active return from the sum of the three and must read zero in every
year. It does. An attribution that does not reconcile is not an attribution.
The five-year averages follow — allocation 0.2582 against selection
0.1030, so 69.6 per cent of the skill was in the asset mix — with the
arithmetic sum of 0.3712 set beside the geometric outperformance of 0.3432 and the
0.0280 of compounding between them shown rather than smoothed. The second
sheet builds tracking error, both information ratios and both Sharpe ratios, and reports that
the manager beat the index on return and lost to it on Sharpe by 0.0099.
Attribution.xlsx · XLSX · 16 KB
Chapters 12, 13 and 15
Fees, active and passive
The fee schedule taken apart: what is charged at each rate, the fee, and the effective rate in
basis points falling from 28.1658 as the mandate grows past the breakpoint
and rising again when 180,000,000 leaves. Then the number for the front page of a fee
negotiation — fees took 83.7893 per cent of the gross outperformance.
The passive counterfactual runs the identical cash flows at the benchmark return and a fee
rate you set, ending at 547,495,942.65 against the active
549,908,879.55: active management finished 2,412,936.89
ahead having charged 6,263,206.77 more, and the sheet solves for the passive fee at which the
two finish level. The last sheet is every three-year window on the record — 5.1900,
3.5956 and 6.8290 — a spread of 3.2334 points from the
start date alone.
Fees_Active_and_Passive.xlsx · XLSX · 15 KB
Conventions used throughout
Blue text
a hardcoded input — you may edit these
Yellow fill
an input cell; everything else on the sheet is a formula
Black text
a formula — do not overtype these
Checks sheet
the printed figure beside the computed one, with a PASS or a FAIL
Why the checks matter more than the models
A workbook that agrees with a book proves nothing on its own — the author wrote both. What
the Checks sheets do is different: they force the model to reproduce a number that was printed
before the model existed, from a formula rather than from the number itself.
On this book the discipline earned its place twice. The portfolio weight matrix was laid out
transposed on the first build, which reproduced the benchmark perfectly and every portfolio return
wrongly — a defect invisible to anyone reading the sheet, and caught in one line by the
Checks tab. And the effective fee rate printed in Chapters 6 and 12 was checked against the wrong
quantity in the first draft of the controls; the workbook was right and the control was wrong,
which is its own useful reminder that a failing check is a question, not a verdict.
Where a shortcut and the full computation disagree, both are shown. Subtracting the four printed
returns gives a spread of 2.7018 where the unrounded series gives 2.7017; the arithmetic average
of the annual attribution is 0.3712 where the geometric outperformance is 0.3432. Neither gap is
an error, and neither is hidden.
Opening the files
The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers. They use
no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks
to update links on opening, decline — there are none.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
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