PerTrac Portfolio Builder

User guide

Table of ContentsPerTrac Portfolio Builder.................................................................................................................................3

Portfolio Builder ........................................................................................................................................... 4Getting Started .......................................................................................................................................... 5

Configuring the Database .......................................................................................................................6Upgrading Portfolio's................................................................................................................................ 9

Portfolio Construction............................................................................................................................... 12Investment & Allocations........................................................................................................................13

Adding an Investment to an Existing Portfolio.................................................................................... 14Removing an Investment From a Portfolio..........................................................................................16Combining Universes to Create a Portfolio.........................................................................................17Reordering the Investments within a Portfolio.....................................................................................18Setting the Start Date for a Portfolio...................................................................................................19Automated Rebalance ........................................................................................................................ 20Allocations Formant & Initial Values....................................................................................................21Saving a Portfolio ............................................................................................................................... 22

Manual Rebalancing...............................................................................................................................23Adding and Removing Columns .........................................................................................................24Applying Filters ................................................................................................................................... 25Entering Initial Allocations....................................................................................................................26

Fees........................................................................................................................................................28Adding a Management Fee................................................................................................................. 30

Optimization Tool Bar............................................................................................................................... 31Investments (Selection)..........................................................................................................................32

Back Fill Options..................................................................................................................................33Setting the Start and End date .......................................................................................................... 34Leverage...............................................................................................................................................35

Return/Risk & Constraints......................................................................................................................36Overwriting Expected Return and Standard Deviation ...................................................................... 37Setting Minimum and Maximum Allocations........................................................................................38

Correlation Matrix................................................................................................................................... 39Overwriting Correlations ..................................................................................................................... 40

Display Optimization...............................................................................................................................41Plotting Statistics..................................................................................................................................45Plotting Universe Statistics.................................................................................................................. 47Plotting the Capital Market Line.......................................................................................................... 49Plotting the Security Market Line........................................................................................................ 50Plotting a Portfolio on the EF.............................................................................................................. 51Plotting a Portfolio off of the EF..........................................................................................................52

Black-Litterman.......................................................................................................................................53Black-Litterman Views..........................................................................................................................54

Reports..................................................................................................................................................... 57Summary Reports.................................................................................................................................. 58Comparison Reports ............................................................................................................................. 60Portfolio and Manager Reports ............................................................................................................ 62Viewing Two or More Active Windows at Once ................................................................................... 63

Tricks and Tips......................................................................................................................................... 64

Portfolio Builder

Getting StartedPortfolio Builder is a stand-alone application that can be launched directly from the PerTrac home window. Theapplication will be set to the active database that is open within PerTrac prior to launching Portfolio Builder. Portfolios that were created with an older version of the application can be imported into the new PortfolioBuilder using the upgrade utility located in the home window of Portfolio Builder.

Configuring the DatabaseBy default, Portfolio Builder is configured to the current database that is open in PerTrac. Portfolio Builder can be configured toany PerTrac Analytics 7.1 database by selecting the database button on the start menu.

The drop down list will display recently used databases that are available locally or on a network drive. Notethat all PerTrac databases will be available; however only versions 7.1 and later will be able to store andautomatically update portfolio models.

The user has the ability to specify the name of the database within the application. This new name will notoverwrite the actual file name of the database but will simply change the name that shows up within PerTrac.This feature can be useful if there are several databases that have the same name, but are located in differentfile locations.

Note: In the figure below there are two databases with identical names. This is possible, because bothdatabase have different folder locations.

The Name function allows the user to distinguish between multiple databases with the same name.

Portfolio Builder can be configured to either a PerTrac compatible Microsoft Access database or a SQLdatabase.

If a SQL database is selected then the SQL server name and database are required and the user has theability to choose between Windows Authentication or SQL Server Authentication

Upgrading Portfolio's

When the Upgrade Portfolio option is selected a new window will open asking the user to navigate to a foldercontaining (.VTS files) created by a previous version of Portfolio Builder. If the saved (.VTS files) are located inseveral different folders then they can all be imported at once by selecting the root folder. The upgrade utilitywill search through all sub folders of the selected folder and will upgrade all (.VTS files) that are found. Theutility will respect the folder structures and will create an equivalent category structure within Portfolio Builderto organize any imported Portfolios.

Once the upgrade is complete a results window will open identifying any errors or (.VTS files) that couldnot be upgraded. The user has the option to save the (.VTS files) to an "UpgradeErrors" category whichwill allow them to be viewed and repaired. To save the (.VTS files) with errors, simply check the box inthe lower left hand corner of the results window

Once the portfolios have been upgraded they will be available within the portfolio and optimization selectionwindow. All selected portfolios that had errors will be saved to the "UpgradeErrors" category and can be viewedand repaired by opening the corrupted portfolio and fixing all errors.

Common errors would include:

• Investment not found in the current database• Name of the investment has changed• No data for an investment• Corrupt data for an investment

Portfolio Construction

Portfolio Builder streamlines the process of creating and maintaining active portfolios within PerTrac. Theenhanced workflow allows users to add and remove investments from a portfolio on the fly and providesenhanced rebalancing options for quick portfolio creation. Portfolios created through Portfolio Builder willautomatically update each month once all constituent funds have updated performance. And any fees that havebeen applied will be maintained. There are two types of portfolios that can be created through Portfolio Builderand the basic set up is the same. Actively managed portfolios will not have backfill options an will requireallocations to be typed in for each investment within the portfolio. This differs from the Pro-Forma portfolio thatallows the user to quickly allocate evenly to all investments within the portfolio and will allow for backfill.

Adding a Investment to an Existing Portfolio Reordering the Investments within a

PortfolioCombining Universes to Create a Portfolio Setting the Start Date for a Portfolio

Removing an Investment from a Portfolio Automated RebalanceAdding and Removing Columns Entering Initial AllocationsApplying Filters Manual Rebalancing

Investment & Allocations The process for selecting investments for a portfolio or optimization model are identical. Selecting any one ofthe four options below will launch the investment selection screen where investments can be loaded by universeor one-by-one on the fly through the investment quick search.

To load a universe of investments click on the load button located in the upper left hand corner of the activewindow. A window will open asking you to navigate to the desired universe file to be loaded. Once the universefile has been selected the active window will populate with investments from that universe. (Investments canbe added or removed from the portfolio from the active window using the Investment Quick Search Function) If you want to retrieve a portfolio that you have already created choose the load portfolio option from thedropdown and a list of all available portfolios will appear.

Adding an Investment to an Existing PortfolioInvestments can also be added to a portfolio by clicking on the investments quick search button designated by amagnifying glass in the upper right hand corner.

The Investment Quick Search is a powerful tool that gives you access to all investments within your database. Individual investments can be added to a portfolio by highlighting the desired investments in the searchresult window and dragging them to the active portfolio window. By default, the master universe will load andan investment search can be utilized by typing in the name of any investment. If you would like to search auniverse other than the Master, you can change the universe by clicking on the folder button next to the searchwindow. Once the investment is located and selected it can be dragged into the active portfolio window or canbe added by clicking the green plus at the bottom of the investment search window.

Multiple investments can be selected at a time by holding "control" down and clicking on the desiredinvestments. A group of investments can be selected by clicking on the investment at the top of the group whilesimulations holding "shift" down and clicking on the investment at the bottom of the group. This will highlight allthe investments in between which can then be added by dragging and dropping or clicking the add investmentbutton lactated at the bottom of the investment search window.

Removing an Investment From a PortfolioInvestments can be removed from the portfolio simply by selecting the investment and clicking the "red X" located at thebottom of the window or by right clicking on the investment to be removed and choosing "Remove Investment" from the dropdown list (Note that all investments can be removed from a portfolio by selecting clear all investments under the right clickoptions)

Multiple investments can be removed at once by selecting all investments to be deleted and clicking on the "red X" at thebottom of the screen.Click Here to Learn How to Select Multiple Investments at Once

Combining Universes to Create a Portfolio

Individual universes can be loaded into the investment search window to combined two or more universes.Simply open the first universe within the investment search by clicking on the folder icon located to the left ofthe search bar. Once the universe is loaded, all investments can be selected and added by holding "shift" downand clicking on the first investment and then the last investment. Once all investments are selected they canbe dragged into the active window or added by clicking on the "green plus sign" located at the bottom of theinvestment search window.

Reordering the Investments within a PortfolioInvestments can be reorganized by using the up and down arrows located in the lower right hand section ofthe active window or by right clicking on the investment in which you would like to move and selecting "up ordown."

Setting the Start Date for a Portfolio There are three choices for portfolio start dates:

1. Common Start Date - Uses a earliest common date among all the investments within the portfolio2. Earliest Start Date - Uses the start date of the investment within the portfolio with the earliest start date

available. (Allocations cannot be made to investments that do not have data for the specified time)3. Fixed Start Date - Allows the user to pick any start date that is after the common start date.

By default, the start date of the portfolio will be set to the common start date between all the investmentswithin the portfolio. To change the start date option simply select the desired option from the "start date"dropdown.

A portfolios end date is dynamic and will always reflect the most up to date performance based on theunderlining investments that are allocated. Optimizations and Reports have end date parameters and can bemodified.

Automated Rebalance

There are five different rebalance options within PortfolioBuilder1. Never2. Monthly3. Quarterly4. Semi-Annually5. Annually

By default, the rebalance frequency will be set to never; however it can be changed by selecting the desiredrebalance frequency from the dropdown located in the lower part of the active window.

Allocations Formant & Initial ValuesAllocations can be entered as a currency or as a percentage depending on what is selected on the "Investment& Allocation" window. By default, the allocation option is set to percentage with an initial value of $1,000. Thevalue of the portfolio is calculated simply on performance and can be displayed on the "Manual Rebalancing"window. To view how to add starting and ending value to the "Manual Rebalancing" window Click Here

Saving a Portfolio

A portfolio model can be saved by clicking on the "Save Portfolio" button located on the main toolbar. Each time a portfolio model is saved, a new investment will be created in the database. The portfolio willbe added to the "All" category and will be available for editing through portfolio builder. If modificationsare made to an existing portfolio, the user has the option to save the changes to that portfolio or createa new portfolio by selecting the "Save as Copy" option next to the "Save Portfolio" button.

Manual Rebalancing

To enter portfolio allocations, click on the "Manual Rebalancing" button located on the edit toolbar of the mainribbon.

An initial allocation is required and must total to 100%. If total allocations to investments within the portfolio are less than100%, the difference will be allocated to cash and will be calculate with a 0% return. Allocations can be typed directly intoeach column and will be highlighted in yellow to indicate a manual rebalance. All other rebalances will be grayed out. Theportfolio will calculate performance based on the initial allocations until the investments do not have current data or theuser rebalances; whichever comes first. (If monthly, quarterly, or annual rebalance is desired, it must be designated on theInvestment & Allocations tab Click Here to Learn How to Automated, Rebalancing ) An equal allocation can be applied to a Pro-Forma portfolio directly from the investment and allocations tab.

Adding and Removing ColumnsThe column headers for the rebalancing table can be customized to include several different options by selectingthem from the "Add and Remove Columns" button. The order of the columns can be reorganized by draggingand dropping the headers into the desired order.

Rebalance Type - Displays any rebalancing that took place for each month and identifies whether it was a"ManualRebalance" by the user or if it was an "AutoRebalance" forced by one of the auto rebalancing options Fees - Show the date and amount of any fees applied to the portfolio Click Here to Learn How to Add Fees to aPortfolio Additions - Simple additions of capital can be added to the portfolio on a monthly basis. This allows the userto increase the capital held by the portfolio without skewing the monthly rates of returns. Withdrawals - Simple withdrawals of capital can be applied to the portfolio on a monthly basis. This allows theuser to decrease the amount of capital held by the portfolio without skewing the monthly rates of returns Portfolio Start $ Value - Is the starting dollar value of the portfolio for any given monthly period. The valuewill capture any fees that have been applied to the portfolio along with additions and withdrawals. Portfolio End $ Value - Is the value at the end of a monthly period and is calculated simply on returns (Alladditions and withdrawals are adjustments to the portfolio starting value). Portfolio % Return - Shows the aggregated returns based on the portfolio constituents returns. Investment % Allocation - Shows the allocation to all constituent investments of the portfolio for any givenmonth. Investment Start $ Value - Shows the portion of capital that is allocated to each investment within theportfolio at the start of each period. (Additions and withdrawals are accounted for by proportionally adding orwithdrawing capital from each investment allocated to). Investment End $ Value - Shows the portion of capital that is allocated to each investment within theportfolio and the end of each period. Investment % Return - Displays the percent rate of return for each investment within the portfolio. % Fund Allocation - Shows the total amount of the capital allocated each month. The allocation should sumto 100% unless a portion of the portfolio is allocated to cash; the returning a zero rate of return.

Applying Filters Filters can be applied to the "Manual Rebalancing" view by selecting different criteria from the "Row Filter"selection. Use the filters to quickly organize the manual rebalancing tab to show only periods where fees wereapplied, or only periods where allocations were manually imputed.

Manual Rebalance - Displays all months where a manual rebalance was applied. Auto Rebalance - Displays all months where an auto rebalance was applied. Click Here to Learn How to Applyan Automated Rebalance to a Portfolio Non-Rebalance - Displays all the months where no rebalancing took place. Additions - Displays all months where any additions of capital were applied to the portfolio. Withdrawals - Displays all the months where any withdrawals were applied to the portfolio. Fees -Displays the amount of any fees applied to a portfolio for each month. Cash balance

Entering Initial AllocationsAn initial allocation is required for all portfolios. Allocations can only be made to investments with sufficientdata. If allocations are made to an investment that does not have adequate data, the allocation will behighlighted and the user will not be able to move on without reallocating to other investments that havesufficient data.

The initial allocation will correspond with the start date selected in the "Investment & Allocations" window andwill be set to the common start date by default. Click here to see how to change the start date of a portfolio

Allocations can be entered as a decimal or currency depending on what was selected on the "investments &Allocations" window.

FeesFees can be added directly to a portfolio by clicking on the Fees button and selecting one or any combination ofthe fee structures that are available. Any fees that are applied to a portfolio will be reflected in the historicalperformance and may be viewed on the "Manual Rebalancing" tab.

Management Fee

Performance Fee

Other Fee

Adding a Management FeeManagement fees can be applied to a portfolio by checking the check box directly to the left of the ManagementFee.

Management fees can be entered as a percentage of the portfolio value or as a fixed amount. If a percentage ofthe portfolio is desired the user must specify if the fee should be applied at the start of the period otherwise itwill be applied at the end of each period. If fees are to be applied quarterly or annually, the portfolio start datewill used by default but can be changed to any month of the year.

Optimization Tool BarThere are two types of optimization methods offered through Portfoliobuilder: the traditional Markowitz efficientfrontier and the newly added Black-Litterman model. Both models can be launched directly from the applicationand allow for quick access to comparative and summary reports. The basic setup for both optimization methodsare the same with respect to selecting investments setting, constraints, and displaying the output.

Optimize your portfolio directly from the portfolio construction window by selecting optimize from the main toolbar. There aretwo optimization methods that can be used: 1.) Markowitz Efficient Frontier 2.) Black-Litterman model. For more informationon how to create a optimization click here Optimizations

Investments (Selection)

Investments may be added to a optimization from an universe previously created or one by one using theinvestment quick search function within the investments section of the optimization. The process for addinginvestments to an optimization model are identical to that of adding investments to portfolios. See the linksbelow for quick references on modifying portfolios for optimization models

Click here to see how to add a investment to an existing portfolio Click here to see how to removing an investment from a portfolio Click here to see how to combine universes to create a portfolio Click here to see how to reordering the investments within a portfolio

Back Fill OptionsIf a particular investment does not have antiquate data to satisfy the start date requirement, a proxybenchmark may be used.

If the proxy benchmark option is selected, a backfill column will appear after the investment name column andwill provide a dropdown list populated by investments within the correl universe. A different benchmark maybe used for each investment within the optimization. The user can browse for another universe if needed (theall.unvx should not be used).

Setting the Start and End dateBy default, the portfolio start date will be on the common date of all the investments within the portfolio. Thecommon end date of all the investments within the portfolio will also be used as the portfolio end date.

There are three options that can be selected for the "start date":

1. Common Start Date - Uses an earliest common date among all the investments within the portfolio.2. Earliest Start Date - Uses the start date of the investment within the portfolio with the earliest start date

available. (Allocations cannot be made to investments that do not have data for the specified time). Click here tolearn how to set a proxy benchmark

3. Fixed Start Date - Allows the user to pick any start date that is after the common start date. There are two options for the "end date":

Common End Date - Uses the latest common date among all investments within the portfolio.Fixed End Date - Allows the user to pick any end date that is prior to the common end date.

LeverageThe Leverage column is located to the right of the start and end date column on the investment tab of eitheroptimization model and requires a ratio value. Entering a 2, for example, would cause the returns or thatinvestment to be leveraged 2 to 1. If no leverage ratios are entered, Portfolio Builder assumes that theinvestments are not leveraged.

Return/Risk & Constraints

Overwriting Expected Return and Standard DeviationHistorical returns and standard deviations calculated from each investments performance stream are used bydefault in both optimization models. These expected returns and standard deviations can be overwritten byclicking directly on the return or standard deviation and entering the expected values. Any modifications will behighlighted and bolded. Constraints can be set on individual assets by selecting the relevant cell and enteringthe allotted amount. If a global minimum or maximum is desired, the set maximum and set minimum canbe utilized to set a common value across all investments.

Customized assumptions and allocations

Setting Minimum and Maximum Allocations Allocation constraints can be set on individual investments or for all investments at once. To set a maximumor a minimum allocation for a single investment, simply select the appropriate cell and enter a value between0 and 1. For example, if no more than a 50% allocation can be made to manager 3, you would select themaximum allocation for manager 3 and type in 0.5. This would restrict the optimization from yielding resultswhere a 50% or more allocation to manager 3 is used. Please keep in mind, it is possible to over constrain themodel, which will lead to no solutions.

Correlation Matrix

A correlation matrix is generated for all investments within a portfolio. The correlation between the investmentsis determined by the historical performance of each investment over the specified time selected on theinvestments tab.

Overwriting CorrelationsThe "Correlation Matrix" tab can also be used to customize the Optimization Setup by replacing the historicalcorrelations with assumptions. To change the correlations simply select the cell and enter the assumed value.Note that any changes to the correlation matrix will be highlighted and bolded. The original values can berestored by clicking on the "Reset All Values" button on the main edit toolbar.

Display Optimization To display the optimization, click on the display optimization button located in the upper left hand side of the"Optimization Options" tab.

A variety of windows can also be displayed by clicking on the efficient frontier line: Efficient Frontier Plot, ActualPortfolio Risk Table, Portfolio Allocation Pie, and Portfolio Allocation Table. Each of the displays can be turned onor off using the drop down box labeled "Show" on the Efficient Frontier Plot toolbar. The display below shows allthe available exhibits.

Each window can be resized by clicking on the top of the frame and dragging to the desired location.

The window will snap into place if one the cursor is dragged over one of the location arrows.

Once the windows have been adjusted they will always populate in the same position; however they can berestored to the default locations by clicking on the "Reset Windows" button located on the optimization optionstool bar.

Plotting Statistics

Over 30 different statistics can be plotted along with the efficient frontier curve.

The statistic will be plotted for each portfolio along the curve creating a second curve that corresponds to theoriginal curve. To view the allocations that are associated with the statistic, simply click anywhere along thenewly plotted curve and the allocations table will populate.

Plotting Universe StatisticsThe "Plot Universe" option allows the user to plot the selected statistic for each investment within the portfolioalong with the efficient curve.

To identify which fund is which, simply click on the desired marker and the name of the fund will display. Clickon a second marker and the name of the newly selected marker will display and the previous one will disappear.

To display all the labels, right click on any one marker and chose "Show All Labels".

Plotting the Capital Market Line

Plotting the Security Market Line

Plotting a Portfolio on the EFPortfolios may be plotted along the efficient frontier line by clicking on any part of the line and selecting "Plot" inthe "Allocation Table"

Plotting a Portfolio off of the EFThe allocations within the table may be overwritten by clicking directly into the appropriate cell and typing inthe desired allocation as a decimal. (The allocation may plot above or below the curve depending on investmentconstraints, returns, and standard deviations.)

Black-LittermanAccess the Black-Litterman optimization model from the start menu bar

Black-Litterman Views

"Market Caps" must be specified for each investment within the optimization. If the exact market caps areunknown, then the current portfolio weights should be used. The weights should be entered as the dollar valuethat each investment holds.

"Absolute Views" allow the user to type in an expected return and assign a level of confidence to the return.

Several views may be added to the optimization by clicking on the add view button.

Custom views require 3 things:

1. At least one investment from both columns must be selected.2. The anticipated out-performance or return.3. The confidence level of the out performance (The confidence will be set to 95% by default, but may be changed

by simply clicking in the field and entering the appropriate confidence level).

Reports

Reports within Portfolio Builder are intended to allow the user to quickly view and compare key statistics forportfolios created within the application. The reports are not to be modified and should be used for quickaccess. If custom reports are desired, Reporting Studio or PowerLink should be utilized.

Summary ReportsThe one-page summary is designed to capture common risk characteristics along with recent returns based onportfolio performance.

A one-page summary report may be viewed on any active or Pro-Forma portfolio by clicking on the "DisplayReport" button in the upper left hand corner of the "Portfolio Construction" tab.

Portfolios plotted in either optimization model may be viewed in a one-page summary report by selecting theportfolio within the optimization model and clicking on the "Reports" tab. Any summary report can be selectedfrom the dropdown list.

Comparison Reports Two or more portfolios can quickly be compared using the comparison reports. There are several pre-formattedtemplates to choose from.

All portfolios that are selected in the portfolio selection window will be available for the comparative reports. There are three ways to select portfolios from the portfolio selection window:

1. Click on a single portfolio and drag the cursor over the desired portfolios.2. Hold control down and click on all desired portfolios.3. Hold the "Shift" key down to select all investments in between the first portfolio selected and the last portfolio

selected.

Portfolio and Manager Reports Portfolio and manager reports are designed to show the overall portfolio characteristics accompanied by allconstituent investments. There are several templates to choose from in a variety of formats. Each templatehas a recommended number of constituent investments and vary depending on size and scope.

Viewing Two or More Active Windows at Once

Two windows can be vied simultaneously by right clicking on any of the tabs and choosing "New Vertical TabGroup". This will split the active window in half and allow you to view two windows at once. Use this option tocompare two portfolios side by side like the example below.

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