Monthly Attribution Summary

Introduction:

Every mutual fund has various schemes and their respective holdings. The fund managers invest money in the stocks of various such holdings. The attribution summary report helps the Risk Management Team to analyse the performance of the schemes and relative holdings of the various funds.

Monthly Attribution Summary Report assists in breaking down the returns against the benchmark, based on Sector Allocation and Stock Selection by the fund manager.

Attribution analysis, also known as “return attribution” or “performance attribution”, is an evaluation tool used to explain and analyse a portfolio’s performance against a particular benchmark. E.g.  For ABC core equity mutual fund if the portfolio return is 10% and benchmark return is 8 % so it reflects that the fund is performing even better than expected. 

For portfolio managers – An effective tool to assess strategies

Attribution analysis can be used to separate the selection and allocation effects.

The allocation effect measures a fund manager’s ability to effectively allocate their portfolio’s assets to various segments. A segment refers to assets or securities that are grouped within a certain classification such as Equity, Fixed, or Technology.

The selection effect reflects the fund manager’s ability to pick the right securities at the right time relative to the benchmark. 

It allows managers to reflect on the entire investment decision-making process and gives them opportunities to improve.

For investors – An effective tool to assess the performance of fund managers

For investors and clients of portfolio managers, attribution analysis is an important method to assess how a portfolio manager has performed and whether they have adhered to their investment strategies and styles.

One of the leading AMC in India employed our expertise and services to automate the ‘Attribution summary’ process.

In this report, data worked upon belongs to attribution data types like Sector-wise, MCap-wise (Market Capitalisation) and Business Type-wise.

Before SheetKraft:

The monthly Attribution process was done by our client, manually using spreadsheets, which takes up a lot of time to complete reports for one fund.

The ‘Attribution Summary’ report needs to be generated for multiple funds and also a comparison report is prepared between these funds.

The entire process usually gets completed by the client in almost 2-3 days depending on the error handling and number of funds and their respective holdings.

Manual steps of the process done by the user are as follows:

• Download the Sector, MCap and Business type attribution raw data from the Bloomberg site for each fund and store them manually.
• Manual check by the client whether the sector data of all the funds has a consistent date period with the other data files for each fund.

• Look for the relevant sheets, extract the necessary data and perform various calculations on them to deduce the required results.
• Repeat the process to generate the reports of the desired funds.
• Create Summary and Comparison report, derived to give an overview about the major factors of all the funds together.
• Format the reports appropriately to make them look visually pleasing and self-explanatory.

The magnitude of data added to the complexity of the calculations and made the entire process more error-prone which took users at least three days to complete depending upon the number of funds for which the report had to be generated.

After SheetKraft:

Using SheetKraft, the report generation process becomes much easier and time-efficient for the client.

• The scheme names mentioned in the raw data files downloaded from Bloomberg to be automatically replaced using SheetKraft with their user-friendly names followed in client AMC maintained at the server level.
• Entire automation is done to generate the required reports using the same raw data files downloaded from Bloomberg including all the calculations, validations and formatting in SheetKraft for each fund.
• Reports are generated in required formats and available for the user to download with one click.

Flowchart:

Overall impact:

• Monthly Attribution report generation through SheetKraft reduces the entire human effort to a maximum of 1-2 minutes as opposed to 2-3 days required earlier. 
• It also gives dynamicity to the entire process as the number of parameters might wary for raw data of various funds but they will get consistent reports with the desired formatting.

The following table illustrates the robustness achieved after automation:

References:

Attribution Analysis – Overview, Components, Importance

Attribution Analysis Definition