Get the free Performance Attribution Analysis - Riordan Consulting

Preface. Performance attribution interprets how investors achieve their performance and measures the sources of value added to a portfolio. This guide ...

How to fill out performance attribution analysis

How to Fill out Performance Attribution Analysis:

1. Start by gathering all the necessary data for the analysis, such as portfolio returns, benchmark returns, and individual investment performances.
2. Calculate the excess return of the portfolio by subtracting the benchmark return from the portfolio return for each period.
3. Decompose the excess return into various factors, such as asset allocation, security selection, and currency effects. This can be done using different models or methodologies like Brinson-Fachler, Sharpe, or Information Ratio.
4. Analyze each factor's contribution to the overall excess return. This will help identify which factors are driving the performance of the portfolio.
5. Once the factors have been analyzed, determine the significance and impact of each factor on the portfolio's performance. This can be measured by looking at the weights or exposures of each factor and their respective returns.
6. Compare the portfolio's attribution results with the investment objectives and constraints to evaluate whether the portfolio is meeting its goals.
7. Prepare a report summarizing the attribution results, including the detailed analysis of each factor's contribution to the performance, and any insights or recommendations based on the findings.

Who needs performance attribution analysis:

1. Portfolio managers: They use performance attribution analysis to understand how different investment decisions and strategies contribute to the overall portfolio performance. This helps them identify areas of strength and weakness and make informed investment decisions.
2. Asset allocators: Performance attribution analysis assists asset allocators in evaluating the effectiveness and performance of different asset classes and investment strategies. This enables them to make informed decisions about asset allocation and reallocation.
3. Clients and stakeholders: Performance attribution analysis provides transparency and accountability to clients and stakeholders by clearly showing how the portfolio's performance is generated. It helps them understand where the returns are coming from and the impact of different factors on the portfolio performance.

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What is performance attribution analysis?

Performance attribution analysis is a quantitative technique used to analyze the sources of an investment portfolio's performance by attributing the returns to various factors such as asset allocation, stock selection, and market timing.

Who is required to file performance attribution analysis?

Performance attribution analysis is typically required to be filed by investment managers, asset management firms, or any entity managing investment portfolios on behalf of clients.

How to fill out performance attribution analysis?

Filling out a performance attribution analysis involves gathering data on portfolio returns, benchmark returns, and relevant performance metrics. This data is then analyzed using a specific methodology or software to attribute the performance to different factors.

What is the purpose of performance attribution analysis?

The purpose of performance attribution analysis is to provide insights into the drivers of portfolio performance, identify strengths and weaknesses in investment strategies, and improve decision-making for future investment allocations.

What information must be reported on performance attribution analysis?

The information reported on a performance attribution analysis usually includes portfolio returns, benchmark returns, asset allocation weights, risk metrics, and the contribution of different factors like asset class, sector, or security selection.