The Performance Attribution Methodology in BondEdge

Teri Geske

Performance attribution is one of the most critical and in-demand tools used in the fixed income investment management process. An attribution analysis that identifies, quantifies and explains sources of performance is often required by clients and pension consultants and may also be used to make internal management decisions that affect investment strategies for the firm. At the same time, performance attribution is one of the most challenging analyses to produce for fixed income portfolios due to extensive securities data, market data and quantitative modeling requirements. To further complicate matters, different areas of the fixed income market define attribution in different ways. There is no single, standardized way of defining how a fixed income attribution analysis should be done, and with good reason – the fixed income market encompasses a broad array of different investors with different mandates, serving the varying needs of their clients and other constituents.

The BondEdge® Performance Attribution (PART) system offers both a Factor-based and Returns-based approach. In this paper, we will discuss the underlying methods for each methodology, as well as the ability to include explicit transactions in either approach.