Performance attribution for portfolios with composite investments

Abstract

In existing performance attribution, composite investments are resolved into simple assets, and the performance attribution provides results only for the resolved, net investment in the simple assets. As a result, the individual investment in the composite investment in isolation is lost, and it is impossible to determine if the investment in the composite investment in isolation helped or hurt performance. Approaches are described to determine attribution in a manner in which the attribution hierarchy is altered so that, after reporting on the performance of the full portfolio, a further level of attribution reports on a set of sub-portfolios. The first sub-portfolio represents the original investments in simple assets only while the other sub-portfolios represent investments in each composite investment. This composite-first performance attribution determines the individual contribution to performance of each composite investment, resulting in more detailed, practical, and intuitive results.

We claim: 
     
         1 . An apparatus comprising:
 at least one processing device comprising a processor coupled to a memory;   the at least one processing device being configured:
 to receive a specification of a set of dates defining an attribution time horizon to be analyzed; 
 to identify, for at least a given date in the set of dates, a set of possible investments, wherein the set of possible investments on at least one of the dates comprises a plurality of simple assets and at least one composite investment, said at least one composite investment comprising an investment in two or more of the plurality of simple assets; 
 to determine, for the given date, a historical portfolio of holdings having original investment weights in the set of possible investments; 
 to calculate, for the given date, a reallocation of the historical portfolio of holdings into a set of sub-portfolios, the set of sub-portfolios comprising (i) a first sub-portfolio representing investments in simple assets only and (ii) at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings, wherein a sum of the original investment weights equals a sum of sub-portfolio investment weights across the set of sub-portfolios; 
 to graphically represent the set of sub-portfolios comprising (i) the first sub-portfolio representing the investments in simple assets only and (ii) said at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings in an attribution hierarchy report, the attribution hierarchy report comprising a plurality of levels, the plurality of levels comprising a first level characterizing overall performance of a portfolio of investments and at least a second level that utilizes the set of sub-portfolios to characterize relative contributions of each sub-portfolio in the set of sub-portfolios, to the overall performance of the portfolio of investments, of the plurality of simple assets and said at least one composite investment, including contributions of the two or more of the plurality of simple assets that define the composition of said at least one composite investment separately as respective simple assets via the first sub-portfolio and as respective components of said at least one composite investment via the second sub-portfolio; 
 to compute a performance attribution analysis for each sub-portfolio in the set of sub-portfolios; and 
 to automatically adjust the portfolio of investments based at least in part on the performance attribution analysis and the attribution hierarchy report, wherein automatically adjusting the portfolio of investments comprises modifying an amount of investment in said at least one composite investment relative to amounts of investment in the two or more of the plurality of simple assets that compose said at least one composite investment to re-balance the portfolio of investments in accordance with at least one risk model selected for the portfolio of investments. 
   
     
     
         2 . The apparatus of  claim 1  wherein the sub-portfolio investment weights in the first sub-portfolio representing the investments in simple assets only have been altered by a function of a sum of the original investment weights in said at least one composite investment. 
     
     
         3 . The apparatus of  claim 1  wherein the performance attribution comprises an asset grouping attribution and a set of supporting data, the set of supporting data comprising at least one of a benchmark, a classification of the assets, and asset returns. 
     
     
         4 . The apparatus of  claim 3  further comprising:
 ranking the contributions computed for each sub-portfolio in the set of sub-portfolios. 
 
     
     
         5 . The apparatus of  claim 1  wherein the performance attribution comprises a factor based attribution and a set of supporting data, the set of supporting data comprising at least one of a set of factors, factor exposures, factor returns, and specific or asset returns. 
     
     
         6 . The apparatus of  claim 5  further comprising:
 ranking the contributions computed for each sub-portfolio in the set of sub-portfolios. 
 
     
     
         7 . The apparatus of  claim 1  wherein said at least one composite investment comprises a composite of two or more other composite investments. 
     
     
         8 . The apparatus of  claim 1  wherein computing the performance attribution analysis comprises determining performance attribution for each sub-portfolio in the set of sub-portfolios in each of two or more sectors of investments, and wherein determining the performance attribution for each sub-portfolio in the set of sub-portfolios in each of the two or more sectors of investments comprises at least one of: determining an allocation effect for each sub-portfolio in the set of sub-portfolios; and determining a selection effect for each sub-portfolio in the set of sub-portfolios. 
     
     
         9 . An article of manufacture comprising a non-transitory processor-readable storage medium having encoded therein executable code of one or more software programs, wherein the one or more software programs when executed by at least one processing device cause the at least one processing device:
 to receive a specification of a set of dates defining an attribution time horizon to be analyzed;   to identify, for at least a given date in the set of dates, a set of possible investments, wherein the set of possible investments on at least one of the dates comprises a plurality of simple assets and at least one composite investment, said at least one composite investment comprising an investment in two or more of the plurality of simple assets;   to determine, for the given date, a historical portfolio of holdings having original investment weights in the set of possible investments;   to calculate, for the given date, a reallocation of the historical portfolio of holdings into a set of sub-portfolios, the set of sub-portfolios comprising (i) a first sub-portfolio representing investments in simple assets only and (ii) at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings, wherein a sum of the original investment weights equals a sum of sub-portfolio investment weights across the set of sub-portfolios;   to graphically represent the set of sub-portfolios comprising (i) the first sub-portfolio representing the investments in simple assets only and (ii) said at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings in an attribution hierarchy report, the attribution hierarchy report comprising a plurality of levels, the plurality of levels comprising a first level characterizing overall performance of a portfolio of investments and at least a second level that utilizes the set of sub-portfolios to characterize relative contributions of each sub-portfolio in the set of sub-portfolios, to the overall performance of the portfolio of investments, of the plurality of simple assets and said at least one composite investment, including contributions of the two or more of the plurality of simple assets that define the composition of said at least one composite investment separately as respective simple assets via the first sub-portfolio and as respective components of said at least one composite investment via the second sub-portfolio;   to compute a performance attribution analysis for each sub-portfolio in the set of sub-portfolios; and   to automatically adjust the portfolio of investments based at least in part on the performance attribution analysis and the attribution hierarchy report, wherein automatically adjusting the portfolio of investments comprises modifying an amount of investment in said at least one composite investment relative to amounts of investment in the two or more of the plurality of simple assets that compose said at least one composite investment to re-balance the portfolio of investments in accordance with at least one risk model selected for the portfolio of investments.   
     
     
         10 . The article of manufacture of  claim 9  wherein the sub-portfolio investment weights in the first sub-portfolio representing the investments in simple assets only have been altered by a function of a sum of the original investment weights in said at least one composite investment. 
     
     
         11 . The article of manufacture of  claim 9  wherein the performance attribution comprises an asset grouping attribution and a set of supporting data, the set of supporting data comprising at least one of a benchmark, asset classifications, and asset returns. 
     
     
         12 . The article of manufacture of  claim 11  further comprising:
 ranking the contributions computed for each sub-portfolio in the set of sub-portfolios. 
 
     
     
         13 . The article of manufacture of  claim 9  wherein the performance attribution comprises a factor based attribution and a set of supporting data, the set of supporting data comprising at least one of a set of factors, factor exposures, factor returns, and specific or asset returns. 
     
     
         14 . The article of manufacture of  claim 13  further comprising:
 ranking the contributions computed for each sub-portfolio in the set of sub-portfolios. 
 
     
     
         15 . The article of manufacture of  claim 9  wherein said at least one composite investment comprises a composite of two or more other composite investments. 
     
     
         16 . The article of manufacture of  claim 9  wherein computing the performance attribution analysis comprises determining performance attribution for each sub-portfolio in the set of sub-portfolios in each of two or more sectors of investments, and wherein determining the performance attribution for each sub-portfolio in the set of sub-portfolios in each of the two or more sectors of investments comprises at least one of: determining an allocation effect for each sub-portfolio in the set of sub-portfolios; and determining a selection effect for each sub-portfolio in the set of sub-portfolios. 
     
     
         17 . A method comprising:
 receiving a specification of a set of dates defining an attribution time horizon to be analyzed;   identifying, for at least a given date in the set of dates, a set of possible investments, wherein the set of possible investments on at least one of the dates comprises a plurality of simple assets and at least one composite investment, said at least one composite investment comprising an investment in two or more of the plurality of simple assets;   determining, for the given date, a historical portfolio of holdings having original investment weights in the set of possible investments;   calculating, for the given date, a reallocation of the historical portfolio of holdings into a set of sub-portfolios, the set of sub-portfolios comprising (i) a first sub-portfolio representing investments in simple assets only and (ii) at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings, wherein a sum of the original investment weights equals a sum of sub-portfolio investment weights across the set of sub-portfolios;   graphically representing the set of sub-portfolios comprising (i) the first sub-portfolio representing the investments in simple assets only and (ii) said at least a second sub-portfolio representing said at least one composite investment present in the historical portfolio of holdings in an attribution hierarchy report, the attribution hierarchy report comprising a plurality of levels, the plurality of levels comprising a first level characterizing overall performance of a portfolio of investments and at least a second level that utilizes the set of sub-portfolios to characterize relative contributions of each sub-portfolio in the set of sub-portfolios, to the overall performance of the portfolio of investments, of the plurality of simple assets and said at least one composite investment, including contributions of the two or more of the plurality of simple assets that define the composition of said at least one composite investment separately as respective simple assets via the first sub-portfolio and as respective components of said at least one composite investment via the second sub-portfolio;   computing a performance attribution analysis for each sub-portfolio in the set of sub-portfolios; and   automatically adjusting the portfolio of investments based at least in part on the performance attribution analysis and the attribution hierarchy report, wherein automatically adjusting the portfolio of investments comprises modifying an amount of investment in said at least one composite investment relative to amounts of investment in the two or more of the plurality of simple assets that compose said at least one composite investment to re-balance the portfolio of investments in accordance with at least one risk model selected for the portfolio of investments;   wherein the method is performed by at least one processing device comprising a processor coupled to a memory.   
     
     
         18 . The method of  claim 17  wherein the performance attribution comprises an asset grouping attribution and a set of supporting data, the set of supporting data comprising at least one of a benchmark, asset classifications, and asset returns. 
     
     
         19 . The method of  claim 17  wherein the performance attribution comprises a factor based attribution and a set of supporting data, the set of supporting data comprising at least one of a set of factors, factor exposures, factor returns, and specific or asset returns. 
     
     
         20 . The method of  claim 17  wherein computing the performance attribution analysis comprises determining performance attribution for each sub-portfolio in the set of sub-portfolios in each of two or more sectors of investments, and wherein determining the performance attribution for each sub-portfolio in the set of sub-portfolios in each of the two or more sectors of investments comprises at least one of: determining an allocation effect for each sub-portfolio in the set of sub-portfolios; and determining a selection effect for each sub-portfolio in the set of sub-portfolios.