Why are my managers not happy with volume weighted average price (VWAP) or high/low price comparisons?
Comparisons with high and low prices suffer from the fact that they represent the very best that could ever be achieved. In addition the volume of business completed at these prices is very often small and less than a typical institutional manager trade size. Managers therefore consider it unfair to be evaluated against an ideal result that they can never beat. A parallel in investment would be to judge a manager against an ideal portfolio that only included the very best performing stocks in any period. By contrast comparing execution prices to VWAP is similar to comparing investment performance to an index. Managers do not like the comparison because they know they should be able to beat the benchmark but often do not. Also with access to “algorithmic trading tools” managers can if they wish guarantee to match the VWAP price but it essentially requires no skills or experience to use the tools. Again traders believe they are contributing to improved performance and establish many reas
