A finished FIN-655 Topic 6 total fund attribution review example, splitting a 0.51-point lead three ways, then reclassifying a bond manager's duration bet as exposure. Searches like "fin 655 topic 6 assignment example", "fin655 topic 6 sample" and "fin-655 topic 6 example" land here.
What a finished FIN-655 Topic 6 total fund attribution review looks like
Illustrative one-year figures anchor the finished review. The policy benchmark holds 50 percent domestic equity, 20 international and 30 bonds, returning 9.0, 6.0 and 4.0 for a total of 6.90. The fund held 52, 18 and 30, and its managers earned 9.4, 5.5 and 5.1, for 7.41. Measuring each segment's allocation relative to the policy total, the overweight to domestic equity and underweight to international add 0.06 together. Selection adds 0.43: domestic managers 0.20, international minus 0.10 and bonds 0.33. Interaction adds 0.018. The review then opens the bond sleeve. Its manager ran a duration of 7.5 against the index's 6.0 while yields fell about half a point, which explains roughly 0.75 of the sleeve's 1.1-point lead. At the fund level that moves about 0.23 from selection into exposure.
How a FIN-655 Topic 6 example is structured
Totals, arithmetic, drill-down and reclassification form the review's four stages. The first table sets policy and actual weights beside benchmark and manager returns for each segment, with the fund and policy totals checked against each other. The method paragraph names the convention used, allocation measured relative to the policy total, and notes that an alternative convention would split the same 0.06 differently between segments. Allocation, selection and interaction each get a line per segment, and the three columns are shown to sum to the 0.51-point lead. The drill-down section asks each manager's attribution what drove its segment result, and the bond manager's reveals the duration position. A paragraph estimates the duration effect as extra duration times the change in yield, and notes that curve shape and convexity would refine it. The review closes with a restated table that separates exposure decisions from security selection and names who made each.
Weights and returns reconciled first
Policy weights with benchmark returns give 6.90, actual weights with manager returns give 7.41, and every effect later in the review must sum to the gap.
Allocation worth six hundredths
Two points moved from international, which trailed the policy total, into domestic equity, which beat it, added about 0.06 under the stated convention.
Selection credited 0.43 before the drill-down
Domestic managers added 0.20, international managers cost 0.10 and the bond manager added 0.33, which on first reading makes selection the fund's main source of value.
A duration bet inside the bond sleeve
Running 7.5 years of duration against 6.0 while yields fell half a point earned about 0.75 of the bond manager's 1.1-point lead.
Exposure and selection restated
After reclassification, exposure decisions account for about 0.29 of the lead and security selection for about 0.21, with 0.018 of interaction between them.
Where marks go in FIN-655 Topic 6
Where this topic loses most papers is in stopping at the first table, crediting 0.43 to selection without asking each manager what produced its segment result. Effects that do not sum to the fund's lead signal a mixed convention, and a strong review shows the reconciliation line. Papers that report allocation by segment without naming the method hide why the domestic figure is 0.042 rather than 0.18. Treating a bond manager's duration position as security selection credits skill for an interest rate exposure the committee could have set itself. A duration estimate presented without noting that it ignores curve shape and convexity claims more precision than the approximation has. A review that restates the effects but never says who made each decision leaves the committee unable to hold anyone to account for the result.
Get a FIN-655 Topic 6 example written to your instructions
Send the FIN-655 Topic 6 instructions and the rubric attached in your classroom, with the fund and manager returns your section supplies. We write a custom example to them, with weights and returns reconciled, the attribution convention named, effects summed to the lead, each manager's result opened up and exposure separated from selection, in 24 to 48 hours. The first one is free.
FIN-655 Topic 6 questions, answered
Why do attribution methods disagree about allocation by segment?
Because they measure an overweight against different reference points. One convention multiplies each weight difference by the segment's benchmark return; another multiplies it by the segment's benchmark return minus the policy total. Across segments the two give the same total allocation effect when weights sum to the same amount, but they credit it to different segments. In the example the domestic overweight earns 0.18 under the first and about 0.042 under the second.
Why count a duration position as exposure rather than selection?
Because it is a bet on interest rates, not on particular bonds. A manager who holds longer duration than the index profits when yields fall and loses when they rise, whatever issues it owns. That exposure could have been set by the committee through the bond benchmark itself. Security selection, in contrast, is the return from choosing among bonds of similar duration and credit, which is what an active bond fee pays for.
Can the review assess a real retirement system's managers?
Not as written. The weights, returns, durations and the half-point fall in yields are invented so each effect can be traced by hand, and a real review would need the managers' holdings, daily or monthly returns and an agreed attribution convention. Decisions about real managers belong to the fund's trustees and staff with their consultants. It is FIN-655 coursework on attribution and passes no judgment on any actual manager.