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Attribution and Risk Analysis

http://www.indxx.com/aboutus.php - Attribution analysis uncovers the impact of the manager’s investment decisions with regard to overall investment policy, asset allocation, security selection and activity.

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Attribution and Risk Analysis

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  1. Attribution and Risk Analysis

  2. Risk Attribution Analysis Overview • Two flavors of analysis • 1. Attribution Analysis • – How much have the fund’s strategic objectives affected performance? • – How much have specific investment decisions affected performance? • 2. Risk Analysis • – What kinds of risks does the fund undertake? • – Does performance reflect the risks?

  3. Performance Attribution Overview • What Does Attribution Analysis Mean? • • A performance-evaluation tool used to analyzethe abilities of portfolio or fund managers. • • Attribution analysis uncovers the impact of the manager’s investment decisions with regard to overall investment policy, asset allocation, security selection and activity. • • A fund or portfolio’s returns are compared to a benchmark in order to determine whether a manager is actually skilled or just lucky.

  4. Two levels at which performance attribution is performed: • • Portfolio level • Pertains to portfolios or investment manager (or fund) level. • • Property level • Pertains to individual properties

  5. Major attributes (return components): • At the PORTFOLIO LEVEL: • Allocation • Selection • Interaction • At the PROPERTY LEVEL: • Initial Cash Yield • Cash Flow Change • Yield Change

  6. At both levels, diagnostic purpose is facilitated by comparison between subject portfolio or mgr with an appropriate benchmark. • • Relative (or differential) performance between subject vs. benchmark is quantified, in total & within components. • Basic idea is that components of the performance differential between the subject & the benchmark reflect performance of various distinct functions of investment

  7. Sector Attribution -- Introduction • Given • –A fund invested in a mixture of sectors • –Returns for the fund’s investments in each sector • –A benchmark with its own mix and returns by the same sectors • •How can one make sense of the above differences to • –Explain to investors why the fund and benchmark • performances differed • –Suggest to managers how to improve performance • –Explain changes in performance

  8. Sector Allocation – The Concept • Manager adds value in two ways: • – Choosing superior investments SELECTION • – Executing a superior strategy ALLOCATION • Superior selection contributions involve: • – Value added by transactions team • – Superior asset/property management practices • – Executing an effective disposition policy • Superior allocation contributions involve: • – Buying/selling in the right markets at the right times • – Buying/selling in the right property types at the right times

  9. Contact us • Website : http://www.indxx.com/aboutus.php • Address: • USA: 470 Park Avenue South, Suite 8SNew York, NY 10016 1 844 55 INDXX (46399) • India: 930 B3, Spaze I Tech Park,Sec-49, Sohna Road,Gurgaon 122018+91 124 4291430/31 • UK: 40 Bank Street, 30th Floor,London E14 5NR+44 (0) 203 290 3623

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