Hi All, been a long time reader but I’ve only just signed up; just failed Level 3, band 7. Trying to do a bit of real world practice and came across the following attribution. What are the first things that stand out? They’ve made an Active loss over the month at looks to be mainly due to a lack of hedging on the portfolio with the 67 bp loss attributable to currency
What other insights can I take from this? Given that the overall OASD is equal to the CTSD can I conclude that there are no bonds with embedded options?
Also, I can tie back the Selection calc from the CFA material; BMK WT * (Pft Return - BMK Return) but I cant tie back the Asset Allocation Return. See Government Bonds for example. There is positive 9 bps attributable to Asset Allocation but the BMK portion for Government Bonds out performed the total BMK and the portfolio has under-weighted Govies compared to the BMK so I would have thought that Asset Allocation portion would be negatove but it’s positive 9 bps; does that look right? Am I missing something there?
Anyone got any other cool insights that I should be looking for? Thanks guys
https://ibb.co/k6dVda
It seems that you are taking this from Bloomberg terminal. Be advised that currency is no part of level 3 curriculum, unless I am wrong. Don’t spend time on something that is not part of the curriculum. Focused on the CFAI book.
Second, the screenshot from Bloomberg shows a combination of fixed income and equity performance attribution. I doubt CFAI will ask a question that combines FI and equity attribution. Again, focus on the CFAI book.
I would like to discuss the screenshot as attribution analysis is part of my job and also have the CIPM. However, the discussion will not help you pass level 3. Focus on CFAI book or any other book that deals with CFAI curriculum only.
Thanks for that, Victory.
I wont be focusing on CFA material until maybe November or December. In the meantime I’m just trying to get motivated in a real world environment. I have recently started a new job within teh Performance Unit and I’m just focusing on my understanding of Attribution at the moment so any insights you have would be greatly appreciated…
I think with 72% of the fund dedicated to Fixed Income maybe using the Brinson model is not the best way to go and a duration based model would give better insights although seeing as most of the active lost is in Currencies perhaps a breakdown per currency under each Asset type would be more beneficial…
Also, since this morning, I have managed to work out the Asset Allocation calc however I’d still like to hear more about the OASD and CTSD or Spread Change metrics
To start with, you will need to confirm the settings at the Bloomberg terminal: Is interaction calculated or is it included in allocation or included in selection? I cannot see interaction in your screenshot. CFAI level 3 curriculum calculates interaction but practitioners prefer including it in selection (sometimes in allocation) because interaction is difficult to explain. Using CFAI formulas will not help in case interaction is not calculated. You will waste precious hours.