Performance attribution

What it means

Decomposing a portfolio’s return relative to its benchmark into the decisions that produced it — typically allocation, selection and interaction.

The exam angle

Brinson attribution is the standard framework. Returns-based attribution infers exposures from return series; holdings-based uses the actual positions.

Where it appears in the syllabus

• Performance MeasurementCFA Level III · exam weight 5–10% · Attribution, appraisal, manager selection and the GIPS standards.
• Risk & Investment ManagementFRM Part II · exam weight 15% · Factor theory, risk budgeting, attribution, hedge funds, illiquid assets.

Related terms

• AlphaReturn in excess of what the asset’s risk exposures would predict.
• CompositeAll portfolios managed to the same strategy or objective, grouped together for GIPS reporting.
• GIPSVoluntary standards for calculating and presenting investment performance, designed so that a prospective client can…
• Implementation shortfallThe difference between the return on a paper portfolio and the return actually achieved, capturing delay, market…
• Information ratioActive return divided by tracking error — value added per unit of benchmark-relative risk.
• Money-weighted returnThe IRR of a portfolio including the timing and size of every contribution and withdrawal.