The useful starting point
An audit or verification claim is only useful when you can identify exactly what was examined and over which period.
Begin with the source of the numbers
Before comparing a return, identify whether it came from a model, a hypothetical combination, a proprietary live account or a customer account. Each source has different limitations. A chart or factsheet should make that classification clear.
Then inspect the period and calculation. A cumulative return, an annualized rate and a recent monthly result are not interchangeable. Cash flows, leverage and the treatment of fees can change the apparent comparison.
Ask what a review actually covered
If a performance record is described as audited or independently verified, look for the underlying report. Identify the reviewer, the dates, the scope and the procedure. Did the review cover calculations, account statements, a model implementation or some other specified subject?
Do not extend a conclusion beyond its scope. Checking one period or account does not establish every product’s track record. Verifying a historical calculation is also different from endorsing a strategy or predicting future results.
Check the cost and benchmark treatment
A net result should explain which costs have been included. Brokerage fees, spreads, slippage, financing, subscriptions and taxes are different items. A figure can be net of some costs and still exclude others relevant to the customer.
Use the same period and an appropriate basis when comparing with a benchmark. A price-only index and a total-return series can differ. So can a leveraged strategy and an unleveraged benchmark. Those differences deserve an explanation rather than a simple headline ranking.
Keep an evidence trail
Use the Data Room to open the current strategy documents and retain the version you evaluated. Note unresolved questions and ask for the relevant supporting document, rather than assuming that a missing detail is favourable.
This guide does not certify an audit or verification of any SquaredQ product. It explains how to assess such a claim. Read the performance categories guide to keep modeled, hypothetical and live results distinct.
