It is given that macro performance attribution is done at the fund sponsor level and micro performance attribution is done at the investment manager level.
I understand the investment manager level where a manager may invest in several securities and it is his/her return attribution that is considered micro level. What exactly do they mean by fund sponsor level?
Fund sponsor level simply means at the firm level. Think about a PE shop with several funds. The PE firm has dedicated managers for each fund. Macro attribution focuses its attention on the PE firm as a whole while micro attribution would look at each manager. Fund sponsor = PE firm in this illustration.
Think of fund sponsor as a pension plan that has a diversified portfolio utilizing many different asset classes (and managers within those asset classes). Macro attribution let’s them see what is driving overall portfolio performance at the asset class level (i.e. our Large Cap Value managers were a positive contributor to total return, while our Emerging Market Equity managers were a detractor).
Micro attribution would then look at a single Large Value manager and see what was driving their performance, say at the sector, industry, characteristic, etc… level (for instance you can look at allocation to a particular sector and how well the individual stocks within that sector performed, that’s where the allocaiton, selection and interaction formulas come into play).
Thanks, appreciate the elaboration.