Portfolio Performance Attribution: The Brinson-Fachler Model

This video demonstrates how to do performance attribution using the Brinson-Fachler model. This is one of the more popular methods for performance attribution in the investment management industry.

[@ashishp520]

Thanks, very informative

[@chriskeo392]

ric thomas.... you are my kind of teacher 🙏

[@ricthomas6436]

Thanks Chris that’s nice to hear!

[@Quanthc5574]

it's so well explained, thank you, that help me a lot!!!

[@moshintayub4112]

So helpful and well-explained!

[@latestcreationsofficial7710]

Well explained.... Pls make video on portfolio Return calculation methodology

[@SamuelBenais]

Great video ! Help me so much with my portfolio management course !

[@dilshodayergasheva3857]

Great video! Nice work, Ric!

[@ricthomas6436]

Thank you Dilshoda!

[@carolinehuynh4823]

very well explained

[@pankidan]

Superb ! content !

[@jjbammomm451]

Please do fixed income attribution and factor risk attribution

[@fajardwialfian2304]

Thanks. Very insightful. Can you make on fixed income attribution video too?🙏

[@carolinehuynh4823]

Hi Ric, can you share a video on the BF Geometric excess returns on allocation and selection

[@babegh4991]

Love u Ric ☺️

[@z93g43]

why do we use benchmark and not portfolio weights for selection effect?

[@user-ic5os5in9o]

how does this differ from factor analysis of hedge funds? Thanks!

[@rodrigogarciagorostizaga7222]

I have a question in the financials, how is it that in the sector calculation investing 33% in financials will give you -7% and investing 44% will give you -4% returns? So investing less will have more losses than investing more in that asset? Thanks and hope you can help me answer this question

[@sushant7984]

This is bcz the portfolio had a bad selection of financial stocks as compared to the BM. It is well explained in the video that this is all due to selection effect the portfolio underperformed the BM in the Financials sector even when the portfolio was underweight as compared to BM in the Financials sector.

[@tsunchen7188]

How do you determine your benchmark? Is there any specific one you use?

[@ricthomas6436]

Sorry to respond so late. Benchmark's are usually determined when you set up an investment strategy. So, you may decide that you are going to run a "midcap" strategy, where you are only going to buy stocks with a market cap between $3 - $10 billion. In that case, you'd find a suitable benchmark with similar guidelines, such as the S&P 400. The key is, to set this up initially and put it in your "Investment Policy Statement" and other fund documents. Then going forward, you measure yourself against that benchmark.

[@andreaardemagni6401]

I think you got the financial interaction wrong. It’s -7 - (-4) …

[@ricthomas6436]

You are correct. Actually, I just typed it in wrong, but the math was correct. As you point out, its -7% - -4% = -3%. Then when we multiply by the 11% underweight, we get the 33 bps. that is shown, which is correct. But my bad on on typing this in incorrectly, and good catch. Thank you.