 # Macro Again...the calcuation.

bigwilly Wrote: ------------------------------------------------------- > CSK where did you get those formulas from? CFAI and schweser they have it.

Did you just write investment manger =SUM(Wa*Wb(Rp-Rb)) Is Rp the return of the portfolio? Rb is the return of the benchmark??

Thanks. Stalla decided that Macro calcs weren’t important! asset alloc = sum(wa*(ra-Rf)) bench alloc = sum(wa*wb(rb-ra)) manager alloc = sum(wa*wb(rp-rb) So those are them you say My bad…when I made up the example. Actual Return is the Return of the Portfoilo, Bechmark return is the return of its benchmark.

ws Wrote: ------------------------------------------------------- > Did you just write investment manger > =SUM(Wa*Wb(Rp-Rb)) > > Is Rp the return of the portfolio? Rb is the > return of the benchmark?? yes, Rp return on investment manager portfolio Rb benchmark Wb - policy allocation for investment manger Wa - asset allocation

CSK…thanks for a million in advance…would you please write out the math for the benchmark? Thanks.

asset alloc = sum(wa*(ra-Rf)) bench alloc = sum(wa*wb(rb-ra)) manager alloc = sum(wa*wb(rp-rb) Wait a minute, whats ra I thought that was Return on portfolio, but then the Bench alloc and manager alloc formulas would be the exact opposite/???

=SUM(Wa*Wb(Rb-Ra)) The numbers aren’t making sense… we dont have the Wb to calcuate the returns… Unless we back into them…

bigwilly Wrote: ------------------------------------------------------- > The numbers aren’t making sense… we dont have > the Wb to calcuate the returns… Unless we back > into them… you do Wb is not the real Wb but relative to Wa

Risk-free asset - the return that would be generated if the fund and all contributions were invested at the risk free rate - this we are fine with 3% Asset categories - the return that would be earned on passive investments at the policy weight for each asset class - So this should be .7*(.6*4.9 + .4*7.85) + .3*(.45*4.25 + .55*7.85) - 3% = 3.13% Benchmarks - the difference between the sum of the weighted returns of manager benchmarks and the asset category return - = ??? Investment managers - the difference between the weighted average sum of manager returns and that of their benchmarks =??? Allocation effects - this category reconciles the difference between the fund’s actual return and the separate analyses conducted above, in order to account for any differences resulting from deviation from policy weights

bigwilly Wrote: ------------------------------------------------------- > Risk-free asset - the return that would be > generated if the fund and all contributions were > invested at the risk free rate > - this we are fine with 3% > > Asset categories - the return that would be earned > on passive investments at the policy weight for > each asset class > - So this should be .7*(.6*4.9 + .4*7.85) + > .3*(.45*4.25 + .55*7.85) - 3% = 3.13% > > Benchmarks - the difference between the sum of the > weighted returns of manager benchmarks and the > asset category return > - = ??? manager benchmark weight = relative manager benchmark weight * asset weight > > Investment managers - the difference between the > weighted average sum of manager returns and that > of their benchmarks > =??? > > > Allocation effects - this category reconciles the > difference between the fund’s actual return and > the separate analyses conducted above, in order to > account for any differences resulting from > deviation from policy weights

BUt how do we know the Relative Manager Benchmark Weight?? Do we have to back into it given the data for the benchmark?

bigwilly Wrote: ------------------------------------------------------- > BUt how do we know the Relative Manager Benchmark > Weight?? Do we have to back into it given the > data for the benchmark? it will be given

Mgr A Large-Cap 60% 5.20% 4.90% Mgr B Small-Cap 40% 7.50% 7.85% 60,40 are relative weights

Anyone up for a summary of all this…? It would be most appreciated.

so what would the Benchmark part be of the equation CSK? Head is in a fog.

Do they give a good example in the Text? I’ll have to check when I get home.

Allocatio Actual Return Benchmark Return Domestic Equity 70% 6.50% 6.25% Mgr A Large-Cap 60% 5.20% 4.90% Mgr B Small-Cap 40% 7.50% 7.85% Domestic FI 30% 5.60% 5.25% Mgr E Government 45% 4.50% 4.25% Mgr F Corportate 55% 5.70% 5.80% 1) wa*wb(rb-ra) = 0.7*0.6*(4.90-6.50) 2) wa*wb(rb-ra) = 0.7*0.4*(7.85-6.50) 3) wa*wb(rb-ra) = 0.3*0.45*(4.25-5.60) 4) wa*wb(rb-ra) = 0.3*0.55*(5.80-5.60) sum them all up to get your attribution I dont know what the hell is Benchmark return for domestic equity as you dont benchmark asset classes, you benchmark particular managers

So now we dont knwo what the next part is :)???