The Science & Art of Performance Attribution for Investing, Servicing & Marketing

January 15, 2004

Abstract

Boston, MA, USA  January 15, 2004

The Science and Art of Performance Attribution for Investing, Servicing & Marketing

According to Celent Communications, IT spending on specialist performance attribution solutions will reach US$287 million by 2007 in the US and European markets.

In a new report, "The Science and Art of Performance Attribution for Investing, Servicing & Marketing," Celent analyzes performance attribution in the financial services community. Market woes, financial pressures, regulatory change, and scandal are making attribution analysis more important, not only for understanding portfolio returns, but also for determining executive compensation and monitoring compliance.

This report discusses the science and art of attribution. While the mechanics of attribution involve methods and data, the application of attribution is an art. Investment analysis requires interpretation, and there is a practical need for easy communication. Attribution, by helping with both of these tasks, is used to serve three cornerstones of the industry: investing, client servicing and marketing. 

Performance attribution as multi-functional tool can add greater tangibility to a client purchase. The purchasing decision is based upon the asset managers’ historical actions and requires consistent results. "Being able to demonstrate consistency and internal controls is a powerful tool in investing, servicing, and marketing," says Denise Valentine, Celent analyst and author of the report.

Investment performance attribution solutions are broadly available to asset managers and institutional investors. There are three types of investment performance attribution providers in the market today: portfolio management systems, performance specialists and analytics specialists. Projected spending for specialist performance attribution solutions is a modest US$223 million for 2004, rising somewhat in 2005-2006 for a total expenditure of US$287 million in 2007. 

According to Valentine, "Even though performance attribution is important, new adoptions of performance attribution solutions will emerge only slowly over the next four years. Financial institutions are wrestling with numerous IT projects, the most important of which involve core infrastructure. In the context of the current business climate, firms will look longingly at attribution systems but core infrastructure will remain a priority."

A is available online.

of Celent Communications' Retail Securities & Investments and Institutional Securities & Investments research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

Send mail to info@celent.com with questions or comments about this Web site.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA January 15, 2004

The Science & Art of  Performance Attribution  for Investing, Servicing  & Marketing

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 5
A WORD ON PERFORMANCE MEASUREMENT 8
THE SCIENCE OF PERFORMANCE ATTRIBUTION 9
  Terms, Methods and Data 9
THE ART OF PERFORMANCE ATTRIBUTION 19
  Comparatives, Investment FIT and Communication 19
GUIDANCE FOR USERS OF ATTRIBUTION 24
CORNERSTONES OF ASSET MANAGEMENT 26
  Investing 26
  Servicing 27
  Marketing 29
TECHNOLOGY TRENDS 30
  Types of Providers 30
  Projected Spending 32
CONCLUSION 35
OBJECTIVITY & METHODOLOGY 39

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