FINC 350 Attribution Assignment

1. What is the purpose of macro-attribution analysis?

2. Identify the categories in the attribution analysis and what they represent.

3. The Fund has a 2% policy-weight to emerging market equities a sub-category within the international equity bucket. The broad category benchmark is MSCI-EAFE and has a 20% policy weight. MSCI-EAFE returned 2.5% and MSCI-EME returned 3.5% during the last month. What is the style-bias impact? Show calculations.

4. Instead of a passive ETF, we decided to hire an active manager whose objective is to outperform the Barclays Aggregate Index. Given what was just proposed to Advisory Board, what would be the VAM impact if during the first month of live performance the manager outperformed its benchmark by 1.2%? Show calculations.

5. Using the information in #4 above, what is the VAM impact in Allocation Tactics if our actual allocation to fixed income was 3 percentage points below policy? Show calculations.

6. In the Alternatives bucket, we have a custom benchmark. Assume the Fund is at target allocation for Alternatives. The underlying ETFs each has their own custom benchmark. Identify which categories in the attribution analysis would be impacted if the underlying ETFs performed in line with their respective benchmark AND each respective benchmark outperformed the custom Alternatives benchmark. Show calculations using appropriate notation.