Question: Attribution analysis uses the Fund Managers and Benchmarks asset allocations and returns across asset classes. A potential investor wishes to understand the skills of a

Attribution analysis uses the Fund Managers and Benchmarks asset allocations and returns across asset classes. A potential investor wishes to understand the skills of a Fund Manager based on the data below:

Asset Class

Fund Weight

BM Weight

FM Return

BM Return

Equity

20%

50%

6%

8%

Bonds

80%

50%

6%

4%

Explain why is it important for the investor to decompose Active returns rather than simply use Active returns to compare performance?

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