The BIRR^® Performance Analyzer is designed to help a manager measure and control a portfolio's exposures to economy-wide surprises. It enables the user to quantify the exposures to risks that usually have been hidden from view and provide managers with a fresh outlook.

Investment managers are always concerned about the riskiness of their portfolios. They are especially concerned about their risks relative to the benchmark against which their performance will be evaluated. It is particularly dangerous, therefore, when some risks are hidden from view, either in the managed portfolio or its benchmark.

This situation is exacerbated by the fact that a manager can easily slip into taking inadvertent risks. For example, strategies of selecting high-growth stocks may entail substantial exposures to the business cycle, exposures that often exceed those of the standard growth benchmarks. Unless these exposures to business cycle risk are recognized, measured, and controlled, high-growth strategies will underperform whenever there is a surprise downturn in economic activity.

BIRR's superior explanation of stock returns gives R-squared values that are almost always substantially higher than those obtained from other approaches. This means that BIRR's analysis does a much better job of accounting for the behavior of stock returns in terms of broad economic influences, and consequently it better isolates the stock-specific effects that result from a manager's stock selection process.