The previous article in this series dealt with multiple period attribution. This is an important technical problem for performance analysts, but for the end-users of attribution reports, there are more compelling issues: 'drilling down' into the results and understanding how specific decisions have added or subtracted value for the portfolio. Four of the main active decisions that can affect a portfolio's performance are: 1) Stock selection; 2) Asset allocation; 3) Currency...

The first article in this series explained the first principles behind the Brinson model. It also showed how simple it is to calculate exact multi-period attributes at the total level using those first principles. In the second article, we looked at different ways to measure the value added by stock selection. This article is about how to measure the value added by asset allocation and currency allocation. It is based on the example on pages 21-40 of Karnosky and Singer (1994). The Karnosky...

The first four articles in this series focused on performance attribution calculations—the 'theory' of performance attribution. Practically speaking, however, performance attribution is normally a commercial activity. Fund managers and their clients use performance attribution reports to understand how a portfolio is being managed. So the emphasis in this final article of the series is squarely on the practical issues that are important to the successful implementation of performance...

In 1994, Denis Karnosky and Brian Singer published the monograph "Global Asset Management and Performance Attribution". It described a method for multicurrency performance attribution that had certain advantages. The principal advantage of the method was demonstrated in several examples that showed that the Karnosky-Singer (or 'KS') model would reward optimal active portfolio 'bets', while more traditional approaches to multicurrency attribution would reward non-optimal bets. This...

The article, the first in this series (Fundamentals of Performance Attribution) explains the first principles behind the Brinson model. It also shows how simple it is to calculate exact multi-period attributes at the total level using those principles.