Return Attribution Analysis

Results Attributable to the Investment Manager

Those results due to the decision of the investment manager are also known as Micro attribution. This analysis involves understanding the drivers of a manager's returns and whether those drivers are consistent with the stated investment process.

Results Attributable to the Asset Owner

Attribution can be conducted to evaluate the asset owner's decisions. This level is known as macro attribution. Each asset class is allocated a percentage of the fund by the institutional investor, and each manager is hired to manage each asset class. Macro attribution measures the effect of the sponsor's choice to switch from the strategic asset allocation, including the effect of “gaps” between the strategic asset allocation and its implementation. In addition to measuring manager selection and timing effects, macro attribution also measures the effects of managerial decisions.

Question

Which of the following best describes micro attribution?

1. Results due to investment manager decision
2. Results due to asset owner
3. Fund sponsor-level decisions

Solution

The correct answer is A.

Those results due to the decision of the investment manager are also known as Micro attribution. This analysis involves understanding the drivers of a manager's returns and whether those drivers are consistent with the stated investment process.

B and C are incorrect. They both represent macro attribution.

Reading 12: Portfolio Performance Evaluation

Los 12 (h) Identify and interpret investment results attributable to the asset owner versus those attributable to the investment manager