Evaluate External Manager Performance Scorecard

Business Context

You’re the analytics lead for Aurora Wealth, a digital wealth manager with $38B AUM across 2.4M retail accounts and a growing institutional channel. Aurora allocates client portfolios to a mix of internal index strategies and 25 external active managers (long-only equity, credit, and multi-asset). External managers collectively run $9.5B AUM and charge 35–85 bps in management fees plus occasional performance fees.

Over the last two quarters, the CIO has flagged that several external managers are “not earning their fees.” At the same time, Relationship Management warns that terminating managers too aggressively can cause client churn (clients notice changes in holdings and performance patterns). Compliance also requires that Aurora demonstrate a repeatable, documented process for manager selection and monitoring.

Metric Scenario

One flagship manager, NorthBridge Growth (US Large Cap), has:

Delivered -1.8% excess return vs its benchmark (Russell 1000 Growth) over the last 12 months
Increased tracking error and deviated from stated sector constraints
Maintained strong marketing narratives, and the PM claims the underperformance is due to “a temporary factor cycle”

The CIO asks you to design an evaluation framework that can be applied across all managers and used to make decisions in the next Investment Committee meeting in 10 days.

You have daily holdings, returns, and transaction data for all managers, plus benchmark and factor model data. You also have client-level flows and churn for accounts exposed to each manager.

Your Task (What you must produce)

Define a primary KPI for external manager performance that is comparable across strategies (equity vs credit) and usable for governance.
Specify the calculation (including time windowing, fee treatment, and how you handle cash flows and leverage).
Decompose the KPI into actionable drivers (skill vs factor exposures vs fees vs risk vs implementation).
Propose a decision policy: thresholds for “watchlist,” “probation,” and “terminate/replace,” including how you’d avoid overreacting to noise.
Recommend 3 concrete actions you would take if NorthBridge’s KPI is below target, and list guardrails to ensure actions don’t harm client outcomes (e.g., churn, tax impact).

Data Available

Source	What it contains	Grain
`manager_daily_returns`	manager_id, date, gross_return, net_return, aum_eod	Manager-day
`benchmark_returns`	benchmark_id, date, return	Benchmark-day
`manager_holdings`	manager_id, date, security_id, weight, sector, country	Manager-day-security
`trades`	manager_id, trade_ts, security_id, side, qty, price, commission, slippage_est	Trade
`fees`	manager_id, date, mgmt_fee_bps, perf_fee, other_expenses	Manager-day/month
`risk_model_factors`	date, security_id, factor_exposures (value, momentum, quality, size), factor_returns	Security-day
`client_positions`	account_id, date, model_portfolio_id, manager_id, market_value	Account-day
`client_flows_churn`	account_id, date, net_flow, churn_flag	Account-day

Constraints: You must support both monthly reporting and ad-hoc diagnostics, and your KPI must be explainable to non-quants on the Investment Committee.

Business Context

Metric Scenario

One flagship manager, NorthBridge Growth (US Large Cap), has:

Delivered -1.8% excess return vs its benchmark (Russell 1000 Growth) over the last 12 months
Increased tracking error and deviated from stated sector constraints
Maintained strong marketing narratives, and the PM claims the underperformance is due to “a temporary factor cycle”

The CIO asks you to design an evaluation framework that can be applied across all managers and used to make decisions in the next Investment Committee meeting in 10 days.

You have daily holdings, returns, and transaction data for all managers, plus benchmark and factor model data. You also have client-level flows and churn for accounts exposed to each manager.

Your Task (What you must produce)

Define a primary KPI for external manager performance that is comparable across strategies (equity vs credit) and usable for governance.
Specify the calculation (including time windowing, fee treatment, and how you handle cash flows and leverage).
Decompose the KPI into actionable drivers (skill vs factor exposures vs fees vs risk vs implementation).
Propose a decision policy: thresholds for “watchlist,” “probation,” and “terminate/replace,” including how you’d avoid overreacting to noise.
Recommend 3 concrete actions you would take if NorthBridge’s KPI is below target, and list guardrails to ensure actions don’t harm client outcomes (e.g., churn, tax impact).

Data Available

Source	What it contains	Grain
`manager_daily_returns`	manager_id, date, gross_return, net_return, aum_eod	Manager-day
`benchmark_returns`	benchmark_id, date, return	Benchmark-day
`manager_holdings`	manager_id, date, security_id, weight, sector, country	Manager-day-security
`trades`	manager_id, trade_ts, security_id, side, qty, price, commission, slippage_est	Trade
`fees`	manager_id, date, mgmt_fee_bps, perf_fee, other_expenses	Manager-day/month
`risk_model_factors`	date, security_id, factor_exposures (value, momentum, quality, size), factor_returns	Security-day
`client_positions`	account_id, date, model_portfolio_id, manager_id, market_value	Account-day
`client_flows_churn`	account_id, date, net_flow, churn_flag	Account-day

Constraints: You must support both monthly reporting and ad-hoc diagnostics, and your KPI must be explainable to non-quants on the Investment Committee.

Business Context

Metric Scenario

One flagship manager, NorthBridge Growth (US Large Cap), has:

Delivered -1.8% excess return vs its benchmark (Russell 1000 Growth) over the last 12 months
Increased tracking error and deviated from stated sector constraints
Maintained strong marketing narratives, and the PM claims the underperformance is due to “a temporary factor cycle”

The CIO asks you to design an evaluation framework that can be applied across all managers and used to make decisions in the next Investment Committee meeting in 10 days.

You have daily holdings, returns, and transaction data for all managers, plus benchmark and factor model data. You also have client-level flows and churn for accounts exposed to each manager.

Your Task (What you must produce)

Define a primary KPI for external manager performance that is comparable across strategies (equity vs credit) and usable for governance.
Specify the calculation (including time windowing, fee treatment, and how you handle cash flows and leverage).
Decompose the KPI into actionable drivers (skill vs factor exposures vs fees vs risk vs implementation).
Propose a decision policy: thresholds for “watchlist,” “probation,” and “terminate/replace,” including how you’d avoid overreacting to noise.
Recommend 3 concrete actions you would take if NorthBridge’s KPI is below target, and list guardrails to ensure actions don’t harm client outcomes (e.g., churn, tax impact).

Data Available

Source	What it contains	Grain
`manager_daily_returns`	manager_id, date, gross_return, net_return, aum_eod	Manager-day
`benchmark_returns`	benchmark_id, date, return	Benchmark-day
`manager_holdings`	manager_id, date, security_id, weight, sector, country	Manager-day-security
`trades`	manager_id, trade_ts, security_id, side, qty, price, commission, slippage_est	Trade
`fees`	manager_id, date, mgmt_fee_bps, perf_fee, other_expenses	Manager-day/month
`risk_model_factors`	date, security_id, factor_exposures (value, momentum, quality, size), factor_returns	Security-day
`client_positions`	account_id, date, model_portfolio_id, manager_id, market_value	Account-day
`client_flows_churn`	account_id, date, net_flow, churn_flag	Account-day

Constraints: You must support both monthly reporting and ad-hoc diagnostics, and your KPI must be explainable to non-quants on the Investment Committee.

Business Context

Metric Scenario

One flagship manager, NorthBridge Growth (US Large Cap), has:

Delivered -1.8% excess return vs its benchmark (Russell 1000 Growth) over the last 12 months
Increased tracking error and deviated from stated sector constraints
Maintained strong marketing narratives, and the PM claims the underperformance is due to “a temporary factor cycle”

The CIO asks you to design an evaluation framework that can be applied across all managers and used to make decisions in the next Investment Committee meeting in 10 days.

You have daily holdings, returns, and transaction data for all managers, plus benchmark and factor model data. You also have client-level flows and churn for accounts exposed to each manager.

Your Task (What you must produce)

Define a primary KPI for external manager performance that is comparable across strategies (equity vs credit) and usable for governance.
Specify the calculation (including time windowing, fee treatment, and how you handle cash flows and leverage).
Decompose the KPI into actionable drivers (skill vs factor exposures vs fees vs risk vs implementation).
Propose a decision policy: thresholds for “watchlist,” “probation,” and “terminate/replace,” including how you’d avoid overreacting to noise.
Recommend 3 concrete actions you would take if NorthBridge’s KPI is below target, and list guardrails to ensure actions don’t harm client outcomes (e.g., churn, tax impact).

Data Available

Source	What it contains	Grain
`manager_daily_returns`	manager_id, date, gross_return, net_return, aum_eod	Manager-day
`benchmark_returns`	benchmark_id, date, return	Benchmark-day
`manager_holdings`	manager_id, date, security_id, weight, sector, country	Manager-day-security
`trades`	manager_id, trade_ts, security_id, side, qty, price, commission, slippage_est	Trade
`fees`	manager_id, date, mgmt_fee_bps, perf_fee, other_expenses	Manager-day/month
`risk_model_factors`	date, security_id, factor_exposures (value, momentum, quality, size), factor_returns	Security-day
`client_positions`	account_id, date, model_portfolio_id, manager_id, market_value	Account-day
`client_flows_churn`	account_id, date, net_flow, churn_flag	Account-day

Constraints: You must support both monthly reporting and ad-hoc diagnostics, and your KPI must be explainable to non-quants on the Investment Committee.

Interview Guides

Business Context

Metric Scenario

Your Task (What you must produce)

Data Available

Evaluate External Manager Performance Scorecard

Business Context

Metric Scenario

Your Task (What you must produce)

Data Available

Your Answer

Evaluate External Manager Performance Scorecard

Business Context

Metric Scenario

Your Task (What you must produce)

Data Available

Evaluate External Manager Performance Scorecard

Business Context

Metric Scenario

Your Task (What you must produce)

Data Available

Your Answer