Performance attribution

Abstract

Over the years, performance attribution has become widely known and used among institutional investors and financial advisors. This approach can be better understood by investigating the positioning and the objective of performance attribution. With regard to the former, it must be said that in logical and operational terms, performance attribution occurs after the measurement, over a given time period, of the relative performance of the actual portfolio and the benchmark portfolio, where the benchmark portfolio represents a specific strategic asset allocation. Taking this result as its starting point, its objective can be described in brief as the decomposition of relative performance. More specifically, it can be said that the aim of performance attribution is to identify the causes of any incongruence in direction and/or size between the overall result of the actual portfolio and that of its reference configuration. Finally, in technical terms, the objective of performance attribution analysis is to highlight and distinguish the management choices and investment decisions that have caused the dissimilar result and assign a value, called attribution effect, to each determining factor, expressing the respective contribution to relative performance.