A.1 ATTRIBUTION METHODOLOGY
The following methodology has been developed for use with single currency portfolios.
Suppose we have a portfolio invested in n asset classes or industrial sectors. Then, suppose that the performance of this portfolio is measured against a benchmark.
A.1.2 Portfolio returns
Let the weight of the portfolio in the i
th asset class be wi
, where Σ wi
= 1, and let the return of the portfolio assets in the i
th asset class be ri
. Now the total portfolio return is:
A.1.3 Benchmark returns
Let the weight of the benchmark in the ith asset class be Wi , where Σ Wi = 1, and let the return of the benchmark for the ith asset class in the base currency of the portfolio be bi. Now the total benchmark return is:
(as it is in the base currency of the portfolio):
A.1.4 Semi-notional returns
We define the semi-notional return of the i
th asset class as wibi
. Now the total semi-notional return is:
A.1.5 Relative performance
We define the performance of the portfolio relative to the benchmark as:
and it is this relative ...