LaPorte Asset Allocation System
Burlington Hall Asset
7072 Whitemarsh Circle
Brandenton, Florida 34202
(866) 402-3364 fax
LaPorte software is designed to help you select investment managers, including CTAs and hedge fund managers, by allowing you to review fund managers’ track records. The software allows you to subset and rank investment managers by a variety of quantitative and qualitative criteria. For example, you can produce a list of managers with social concerns and then rank those managers by the size of their largest drawdown. Once you have created an interesting list of managers, you can then research these managers using various statistical and individual attributes, such as the managers’ Sharpe ratios, their fees for services and why they think they are qualified to manage your money in the first place. Assuming this process goes well, that you have found a few managers you like and that you are an investment professional, you can then use LaPorte to design and edit reports to send to clients and prospects.
I’m afraid that I may have made the process appear a bit easier than it is in the paragraph above. Roughly speaking, you face three hurdles in using this software. First, can you use this software to do what you think you want to do? Second, does this software do anything of value? Third, you need data.
Installation (2 of 4)
The software arrives on disk and first requires you to install a security device that includes installation instructions. Installation and startup was a problem, but fortunately LaPorte’s technical support is really quite good and very responsive to my questions. Perhaps more important is that the online documentation is extensive and readily available. Even better, the help function is context dependent, which means clicking on the help function takes you to the place in the documentation you want to go.
Ease of use (2 of 4)
Well-designed software guides you through the process of using it properly and prevents you from doing anything irrevocably stupid or destructive. Such software is described as “intuitive,” unfortunately, LaPorte software is not intuitive.
For example, suppose you wanted a graph of Dunn’s World Monetary Asset’s total return per month. Intuitively, you would expect to select “Dunn's World Monetary Assets,” perhaps from a drop-down box and then select total returns per month from another drop down. Well-designed software would allow you to take these actions in either order.
In LaPorte you need to select “Rolling Window” from the main menu, then select “USR,” which is an investment database, and then the investment manager. You can then choose to present total return per month on the left or right axis. You can use the second axis to present other information of value, such as the amount under management. You then press the “Run” button. You would then get an error message because you needed to specify the investment manager in the bottom table. To do that, and this is not mentioned in the error message, you need to hit the “Add” button. You hit the “Add” button and you get, not a rolling window, but a graph with one point on it. The problem is that you didn't specify a date range. You check the documentation, hit “Autodate” and then “Run” and you get the graph shown. “Autodate” fills in the first and last dates in the database, which is sensible. If you want to use a subset of the data, and there are many instances where you will, you can edit the dates. If you edit the dates incorrectly, if you put in “05” when you should have put in “2005,” for example, you get an error message and then the system crashes.
The system does not hold your hand, which it should, but this is not a fatal flaw. You could have avoided this problem by reading the documentation, but if you are not willing to read the documentation, you will run up against this problem repeatedly. LaPorte does not use words or icons the way you or I might expect, nor does it follow software conventions, which it should. However, once you learn the internal logic of his system, and this takes only a little bit of work, this system is relatively easy to use.
Utility (2 of 4)
The marketing material claims more than 105 statistical functions, which seems accurate. If you are a serious and thoughtful investor and if you have been reading Futures magazine for a few years you are probably familiar with most of these functions. If you are an investment broker or investment advisor you may well have produced reports for your investors using these statistics. Whether these are the right statistics and graphing tools and whether the software does anything of value is another question. As mentioned, drawdown is one of the available statistics. Drawdown is one of the statistics everyone looks at and yet there are few statistics as unstable and useless. Consider Bear Stearns’ final drawdown. Nothing in its history would suggest the firm’s stock was capable of drawing down so far. Drawdown is a particularly feeble statistic, but none of the others LaPorte offers are much better. In all fairness, I must point out that the statistics LaPorte provides are the popular ones, the ones most investors want. Many investors find comfort using the same statistics everyone else in the industry uses. If you are such an investor, or if you are a broker or investment manager who caters to such investors, you will probably like this product. On the other hand, if you are a more thoughtful investor, you are on your own.
Data (2 of 4)
Assuming you are satisfied with the usability of this software, you still need data, which you will need to acquire separately and upload on your own one manager at a time or in bulk. Uploading managers one at a time is incredibly time consuming. Uploading managers in bulk is possible, but likely to be difficult and error prone. If you buy the data as a package from LaPorte, you will get it at a substantial discount from the original vendor. Expect to pay $3,000 a year or more. On the positive side, uploading the proprietary data was quick and easy.
Fred Gehm is a hedge fund consultant. His Web site is www.fredgehm.com