Working though Macro Performance Attribution - trying to figure out where they get their #s – FIRST PARAGRAPH p40 Asset Allocation: Anyone know where they get 3.67% for the Weighted Asset Return? Policy Mix: 75% Equities / 25% Bonds (Exhibit 3: p36 + returns on Exhibit 5 p 37) Asset Return -> .75 (4.55%) + .25 (2.16%) = 3.95% - they have 3.67%…
The last column on page 37 has the benchmark returns: .75*4.04 + .25*2.56 = 3.67.
Hmmmmm - per page 39 (#43-10) they define the formula for Asset Category as: R(AC) = Sum[w(i) x [r(ci) - R(f)] ] where w(i) = policy weight of asset category r(ci) = Return on the 'i’th asset category (not the benchmark) r(f) = Risk Free Rate of Return interesting… Shouldn’t I be taking difference of The ACTUAL Asset Return for the period over the Risk Free Rate?
Ahh got it - 3rd sentence of Asset Category paragraph on p37 talks about the passive investment of the beginning balance + external cash flows into the asset benchmarks at the policy %…