Performance Attributions

Anyone have a good way of remembering/understanding the formula’s for Micro, Macro and Global?

Any tricks in this?

From memory:

micro = remember: weight difference + both + return difference

= sector allocation + allocation/selection interaction + within-sector selection

= sum(wjp - wjb)(Rjb - Rb) + sum(wjp - wjb)(Rjp - Rjb) + sum(wjb)(Rjp - Rjb)

macro = remember: NRA is a b*tch in the @$$

= net contributions + risk-free rate + asset class allocation + benchmark weights + investment managers’ active return + (plug figure, starts with A… can’t remember, ironically) (edit: last A = “allocation effects”)

global = remember: local + currency

= income in local + capital gains in local + currency effect, where

capital gains in local = true (portfolio - benchmark), misfit (benchmark - index) and index

currency effect = (1 + Ri + Rcg) * initial capital * %change in (F:D = D/F)

For micro and global, i find it easy to recall thr formulas from drawing the squares.

Marc le Febre has done a fabulous job here.


Micro is at the investment manager level

Pure Sector Allocation

(Weight in sector-Weight in bemchmark) x ( Reurn in benchmark of sector - overall return of benchmark)

Within sector

Weight in benchmark x (return in sector- return in sector benchmark)

Allocation effect

(Weight in sector-Weight in bemchmark) x ( Reurn of sector - return of benchmark)

Macro Attribution

At the fund sponsor level. Inputs are

policy allocations

benchmark returns

fund valuations.

Performing the attribution

net contributions, rfr, asset allcoation, benchmark, investment manager , allocation effect


currency contribution= (return in domestic - return in foreign currency) x weight of country allocation in portfolio. This is then summed for all countries.

market allocation= weight of country in benchmark x ( return of country in local currency - return of benchmark in local currency). This is summed for all countries.

security selection = (weight of country in portfolio - weight of benchmark in portfolio) x return of country in portfolio in local currency. This is then summed for all countries.

Multi period return

Attribute return in period 1 x portfolio return in period 2 + Attribute return in period 2 x benchmark attribute return in period 1.

Risk Measures

Standard deviation, Sharpe ratios etc.

Phew exhausting

You are correct. I made a mistake

Ra1 x (1+Rb2)+Ra2 x(1+rp1)