“Macro performance attribution is carried out at the sponsor level” Please help me understand. Does it mean we’re evaluating fund sponsor’s performance: i.e., how effectively the sponsors allocate capital: 1.Net contribution: they can put their money under the mattress and earn 0 return 2.Risk free: they can choose to put everything in T to earn risk free rate 3.Asset Category: they can choose to put money in broad index and earn benchmark return 4.Benchmark: they can put money in indices that reflect certain style 5.Investor mgrs: they can choose to give money to investment mgrs for active mgmt 6.Allocation effect: a plug figure = fund sponsor’s deviation from their policy allocations And then for Micro performance evaluation, we are focusing on #5 above, i.e., we are evaluating manager’s performance. Thanks.
I think that’s it.
You got it.
For calculation purposes (asked on last year’s CFAI mock exam), it may be easier to think about it from the B-M and P-B perspective. 1.Net contribution: as you said, “0” return 2.Risk free: as you said, Rf 3.Asset Category (“pure benchmarking”)*: Market index return (M) - Rf 4.Benchmark (“misfit rtn” or “style bias”)*: Manager custom benchmark (B) - Market index (M) 5.Investor mgrs (“active rtn”)*: Manager portfolio rtn § - custom benchmark (B) 6.Allocation effect: as you said, a plug figure = fund sponsor’s deviation from their policy allocations *weighted.
That is very helpful, lolly. I just made new neuron connections in my brain.
Wow Lolly, your explanation is more effective that anything in Schweser or CFAI. Thanks!