| Course | GF570 Portfolio Management |
|---|---|
| Unit | Unit 8 |
| Paper type | Attribution analysis |
| Length | About 870 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF570 Unit 8
A 0.53-Point Shortfall Split Three Ways: A Unit 8 Attribution Analysis of a Foundation's First Year
[Student Name]
Purdue University Global
GF570: Portfolio Management
Unit 8 Attribution Analysis
[Instructor Name]
[Date]
The foundation and every weight and return are composite and illustrative; the articles cited are real.
The Year in One Line
The foundation returned 11.07 percent. Its policy benchmark returned 11.60 percent. The shortfall was 0.53 points, about $970,000 on average assets near $184 million.
The Data
Average weights for the year, portfolio against benchmark, and segment returns:
1. U.S. equity: 35 percent against 32; returned 19.8 percent against 21.0.
2. Non-U.S. equity: 21 percent against 23; returned 9.1 against 10.4.
3. Fixed income: 26 percent against 27; returned 3.9 against 3.1.
4. Real assets: 6 percent against 6; returned 8.2 against 7.5.
5. Private equity: 12 percent against 12; returned 6.0 against 10.0.
The Method
Attribution of this kind grew out of work separating a fund's policy mix from its active decisions (Brinson et al., 1986). The analysis uses the Brinson-Fachler method. The allocation effect for each segment is the difference in weight times the difference between the segment's benchmark return and the total benchmark return. Selection measures how much better or worse each sleeve did than its own index, weighted by the policy's allocation to that sleeve. The interaction effect is the difference in weight times the difference in returns. Measuring allocation against the total benchmark return, rather than against zero, credits an overweight only if the segment beat the benchmark as a whole (Brinson & Fachler, 1985).
The Results by Segment
U.S. equity. Allocation: 3 points overweight times 21.0 less 11.60, plus 0.28. Selection: 32 percent times negative 1.2, negative 0.38. Interaction: negative 0.04.
Non-U.S. equity. Allocation: 2 points underweight times 10.4 less 11.60, plus 0.02. Selection: 23 percent times negative 1.3, negative 0.30. Interaction: plus 0.03.
Fixed income. Allocation: 1 point underweight times 3.1 less 11.60, plus 0.09. Selection: 27 percent times 0.8, plus 0.22. Interaction: negative 0.01.
Real assets. No allocation effect. Selection: plus 0.04.
Private equity. No allocation effect. Selection: 12 percent times negative 4.0, negative 0.48.
The Totals
Allocation: plus 0.39. Selection: negative 0.91. Interaction: negative 0.02. Together: negative 0.53, matching the shortfall.
The allocation effect looks like skill, but almost all of it came from being overweight U.S. equity, and that overweight existed only because the foundation could not sell its restricted acquirer shares, so the year's one positive contribution was an accident nobody decided.
Who Chose What
Allocation. The 3-point U.S. equity overweight came from the acquirer block, which rose with the market. The non-U.S. underweight was its mirror. The small fixed income underweight reflected cash held for grants. None of these was an active decision to bet on one market over another.
Selection, U.S. equity. Negative 0.38 points. The acquirer shares returned less than the U.S. market, and the screened index account, which underweights the acquirer's industry, lagged slightly when that industry led. Neither is a manager failure.
Selection, non-U.S. equity. Negative 0.30 points, mostly from the emerging markets manager, which trailed its index by about 4 points. This is the one clear active decision that cost money.
Selection, fixed income. Positive 0.22 points from the core-plus manager's modest high-yield position.
Selection, private equity. Negative 0.48 points, the largest single effect. Private equity funds report valuations with a lag and charge fees early in their life, so young programs typically trail a public-market benchmark in their first years. Research on private equity returns finds that comparisons with public markets depend heavily on timing and on how the benchmark is constructed (Kaplan & Schoar, 2005).
Checking the Arithmetic
The three effects sum exactly to the shortfall: plus 0.39, negative 0.91 and negative 0.02 make negative 0.53. The segment returns weighted by portfolio weights give 11.07 percent, and by benchmark weights 11.60 percent. Because the method measures allocation against the total benchmark return, an overweight in a segment that merely matched the benchmark would show no allocation effect, which is why real assets and private equity, held at policy weight, show none.
Limits of One Year
A single year of attribution is noisy. The emerging markets shortfall could reverse next year; the private equity lag almost certainly will narrow as funds mature. Attribution is most useful as a running record over several years.
What the Trustees Should Take From It
Of the 0.53-point shortfall, about 0.48 comes from a private equity program in its first year, which was expected, and about 0.30 from one active manager. The positive allocation effect should not be counted as skill. The emerging markets manager deserves a closer look; the private equity lag deserves patience.
A Note for the Investment Committee
The committee should resist reading the positive allocation figure as a reason to keep the acquirer shares longer. Their contribution this year came from a rising market, and the same concentration would have cost the fund in a falling one.
Recommendation
Report attribution each quarter with a line separating effects that came from decisions from those that came from the restricted shares and the private equity build-up, and place the emerging markets manager on watch for one more year.
References
Brinson, G. P., & Fachler, N. (1985). Measuring non-U.S. equity portfolio performance. The Journal of Portfolio Management, 11(3), 73-76. https://doi.org/10.3905/jpm.1985.409005
Brinson, G. P., Hood, L. R., & Beebower, G. L. (1986). Determinants of portfolio performance. Financial Analysts Journal, 42(4), 39-44. https://doi.org/10.2469/faj.v42.n4.39
Kaplan, S. N., & Schoar, A. (2005). Private equity performance: Returns, persistence, and capital flows. The Journal of Finance, 60(4), 1791-1823. https://doi.org/10.1111/j.1540-6261.2005.00780.x
GF570 Unit 8 instructions, in plain terms
Unit 8 of GF570 asks for a performance attribution analysis. Present the portfolio's and benchmark's weights and returns by segment. Name the attribution method and explain how it measures allocation, selection and interaction. Compute each effect for every segment, show the totals, and confirm they sum to the active return. Then interpret: for each effect, ask whether it came from a decision someone made or from circumstances, such as restricted holdings or a private program's early years. Identify which managers or choices helped and hurt. Note the limits of a single year. Recommend changes to reporting or manager oversight. Cite the original attribution research and studies on private equity performance in APA 7.
How the GF 570 Unit 8 example is put together
The year's results and the shortfall in dollars come first in the sample, followed by five segments with weights and returns. A method section names Brinson-Fachler, cites the earlier Brinson, Hood and Beebower work, and explains why allocation is measured against the total benchmark return. Segment results list allocation, selection and interaction, and totals confirm the 0.53-point shortfall. The highlighted sentence asks who chose the allocation effect. A section on who chose what traces each effect to the restricted shares, the screened index, the emerging markets manager, the core-plus manager or private equity, citing Kaplan and Schoar on early-year lag. An arithmetic check, a note on one-year noise, a caution for the committee and a reporting recommendation close the analysis.
Reading the GF570 Unit 8 grading rubric
Attribution analyses in GF570 earn the first share of points for correct effects computed with a named method and totals that reconcile to the active return. Graders check that the method's definitions are applied consistently across segments. The largest analytical share rewards interpretation that separates decisions from circumstances, since raw effects can credit or blame the wrong party. Identifying which specific managers or choices drove the result shows practical value. Instructors in the MS in Finance program value cautions about single-year noise and private asset benchmarks. A recommendation that changes reporting or oversight earns the final share, along with clear tables and the attribution and private equity studies listed in APA 7. Graders also notice when the analysis checks that effects sum exactly to the shortfall.
Common GF570 Unit 8 mistakes, and how to avoid them
The most common GF570 Unit 8 error is computing allocation against zero instead of against the total benchmark return, which credits overweights in any segment that simply rose. Others mix methods across segments or leave totals that do not reconcile. Interpretation stops at labels, calling a positive allocation effect good decision making when no one made the decision. Private equity's benchmark lag is ignored. A single year is treated as conclusive. For any portfolio your case supplies, keep the steps: data, a named method, segment effects, reconciled totals, decisions separated from circumstances, cautions and a recommendation. Writers also forget to state whether returns are gross or net of fees, which changes every selection figure.
Get a GF570 Unit 8 example written to your instructions
Segment weights and returns from your GF570 Unit 8 data, the benchmark's definition and the rubric suffice; say which attribution method your text uses. Effects are computed per segment, reconciled to the active return and interpreted decision by decision. The opening custom sample is ready inside 24-48h, with no charge attached. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF570 Unit 8 questions, answered
Which attribution method should I use?
The one your text teaches, named at the start. Brinson-Fachler and Brinson-Hood-Beebower give the same total allocation effect but distribute it differently across segments. The sample uses Brinson-Fachler and shows the alternative in a short comparison, so a grader expecting either method can follow the reasoning and see that the totals agree.
What is the interaction effect?
The part of active return that comes from overweighting a segment where the manager also outperformed, or underweighting one where the manager lagged. It is the product of the weight difference and the return difference. Some texts fold it into selection. The sample keeps it as its own line, here a small minus 0.02, and states the convention it follows.
Should private equity be in the attribution at all?
Usually yes, with a caution. Its benchmark is often a public index plus a premium, while its returns arrive on valuations reported with a lag, so one year's comparison can mislead. The sample includes the segment, flags the lag, and suggests judging private equity over longer periods with a method suited to irregular cash flows.
Where can I find a free GF570 Unit 8 sample paper?
A complete GF570 Unit 8 attribution analysis of a foundation's first year is available here, using the Brinson-Fachler method across five segments, with interpretation and APA 7 references.
Why shouldn't the allocation effect count as skill?
Almost all of it came from being overweight U.S. equity, and that overweight existed only because the restricted acquirer shares could not be sold. No one decided to make that bet.