Models for Fixed Income Returns
Accurately modeling fixed income return involves carefully considering all potential factors contributing to... Read More
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.
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?
- Results due to investment manager decision
- Results due to asset owner
- 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.
Performance Measurement: Learning Module 1: Portfolio Performance Evaluation
Los 1(h) Identify and interpret investment results attributable to the asset owner versus those attributable to the investment manager