5. Performance attribution Analyzing how security selection and asset allocation effect the performance of a fund is called attribution analysis Consider a fund with the following asset classes, target allocations, actual allocations, benchmark returns, and actual return Asset Class Allocation Target Allocation Actual Benchmark Return Stocks Bonds 60.00% 40.00% 55.00% 45.00% This means the sum of the stock and bond abilities is 11.00% 3.50% The sum of the stock and bond allocation effects is Fund Return 10.00% According to this data, the stock selection ability is 55.00% X (10.00% - 11.00%) = -0.55% and the bond selection ability 45.00% x (3.70% - 3.50%) = 0.09% 3.70% %. This means the fund manager demonstrates poor According to this data, the stock allocation effect is (55.00% - 60.00%) x ( 11.00% - 8.00%) = -0.15% and the bond allo (45.00% - 40.00%) x (3.50% - 8.00%) = -0.22% %. This means the fund manager demonstrates allo