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Teaching Tool 17 - Portfolio Attribution Example 6-Nov-07 Personal Finance: Another Perspective Purpose

This spreadsheet provides a template for calculating portfolio attribution to determine the sources of returns. It compares the returns and weights of benchmark asset classes to a portfolio to see the impact of asset allocation and security selection. The example shows the portfolio underperformed the benchmark by 0.26% due to negative contributions from stock selection in domestic equities and bonds. Asset allocation had a positive contribution of 0.13% while stock selection reduced returns by 0.39%, resulting in the overall underperformance relative to the benchmark.

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Shobhit Goyal
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290 views2 pages

Teaching Tool 17 - Portfolio Attribution Example 6-Nov-07 Personal Finance: Another Perspective Purpose

This spreadsheet provides a template for calculating portfolio attribution to determine the sources of returns. It compares the returns and weights of benchmark asset classes to a portfolio to see the impact of asset allocation and security selection. The example shows the portfolio underperformed the benchmark by 0.26% due to negative contributions from stock selection in domestic equities and bonds. Asset allocation had a positive contribution of 0.13% while stock selection reduced returns by 0.39%, resulting in the overall underperformance relative to the benchmark.

Uploaded by

Shobhit Goyal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Teaching Tool 17 - Portfolio Attribution Example

6-Nov-07
Personal Finance: Another Perspective

Purpose:
The purpose of this spreadsheet is to give an Excel template for calculating
the source of returns from your portfolio. There is considerable discussion as to the
best method of determining portfolio attribution, and the best method is one that uses
daily data. However, this is a good learning tool and may be helpful assuing there is
limited trading during the period. Please remember the principles of successful
investment as you manage your portfolio.

Disclosure:
The purpose of this spreadsheet and this class is to help you get your financial house in
order and to help you on your road to financial self-reliance. If there are mistakes in this
spreadsheet, please bring them to our attention and we will correct them in upcoming
versions. The teacher, and BYU, specifically disclaim any liability, or responsibility for
claims, loss, or risk incurred, directly or indirectly, from using this material.
Teaching Tool 17 - Portfolio Attribution Example
Personal Finance: Another Perspective

Following is an example of Performance Attribution for a multiple asset benchmark and portfolio. You can perform this
analysis on a daily, monthly, quarterly, and annual basis. You will have a separate page for each of your periods of analysis.

Put Your Benchmark Returns and Weights Here Put Your Investment Returns and Weights Here
Asset Classes Index Returns Beginning Weight Asset Classes Fund/Stock Returns Beginning Weight
Equities Equities
Domestic Domestic
SPX S&P 500 (SPX) 2.50% 60.0% Your Total Domestic 2.00% 70.0%
VTSMX Vamguard Index Fund 2.00% 70.0%

International Equities International Equities


EAFE MSCI EAFE (EAFE) Your Total International 0.00% 0.0%
MACSX Matthews Asia Fund 0.87%

Bonds Bonds
LEHMN Lehman Aggregate 1.20% 30.0% Your Total Bonds 1.00% 20.0%
DBMIX Dreyfus Bond Fund 1.00% 20.0%

Real Estate Real Estate


SSB REIT Mortgage Your REITs 0.00% 0.0%
AIGYX AIG Real Estate 2.00%

Cash/Money Market Cash/Money Market


1 Month T Bills 0.50% 10.0% Your Cash 0.50% 10.0%
ETPXX Money Market MF 0.50% 10.0%

Total Weight 100.0% Total Weight 100.0%


Total Weighted Benchmark Return: 1.91% Total Weighted Portfolio Return: 1.65%

Total Contribution from Active Management -0.26%


Attribution Calculations:

Contribution from Asset Allocation


Asset Classes Benchmark
Portfolio Benchmark (1) Asset Class Weighted (2)
Actual Actual Weight Actual Benchmark Weighted
Weight Weight Difference Return Return Difference (1) *(2)
Domestic Equities 70.0% 60.0% 10.0% 2.50% 1.91% 0.59% 0.059%
International Equities 0.0% 0.0% 0.0% 0.00% 1.91% -1.91% 0.000%
Bonds 20.0% 30.0% -10.0% 1.20% 1.91% -0.71% 0.071%
Real Estate 0.0% 0.0% 0.0% 0.00% 1.91% -1.91% 0.000%
Cash/Money Market 10.0% 10.0% 0.0% 0.50% 1.91% -1.41% 0.000%
Total Weights/Returns 100.0% 100.0%
Total Contribution from Asset Allocation 0.130%

Contribution from Stock Selection


Asset Classes: Portfolio Benchmark Return Portfolio
Actual Actual Difference Actual
Return Return (3) Weight (4) (3) *(4)
Domestic Equities 2.00% 2.50% -0.50% 70.0% -0.350%
International Equities 0.00% 0.00% 0.00% 0.0% 0.000%
Bonds 1.00% 1.20% -0.20% 20.0% -0.040%
Real Estate 0.00% 0.00% 0.00% 0.0% 0.000%
Cash/Money Market 0.50% 0.50% 0.00% 10.0% 0.000%
Total Returns/Weights 1.65% 1.91% -0.26% 100.0%
Total Contribution from Stock Selection -0.390%

Total Contribution from Asset Allocation 0.13%


Total Contribution from Security Selection -0.39%
Total Contribution from Active Management (note 2) -0.26%

Notes:
1. MSCI EAFE is the Morgan Stanley Capital International index for Europe, Asia, and the Far East.
2. There will be slight differences due to rounding

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