Risk-Based Portfolio Performance Attribution

Performance attribution is a standard part of the manager's portfolio analytical tools, allowing to understand which solutions capture profit and which ones capture loss. This analysis gives managers an understanding of what factors led to the result of the managers' work, what risks and to what extent they took in order to make a profit. The paper presents existing approaches to evaluating the effective of portfolio investment management. The attribution assessment process is an important component of the Performance evaluation process, which answers the question: what factors have contributed to the positive or negative performance of portfolio management? Based on the literature, the study suggests possible methods for including two types of risk factors in the Brinson model. The first, Jensen's alpha, which coincides with the alpha of the portfolio, and is responsible for adjusting the systematic risk of the portfolio. The second, so-called "Fama-beta", is calculated as the ratio of the standard deviation of the portfolio to the standard deviation of the benchmark. Taking into account the contribution of risk factors to the assessment of portfolio performance allows not only to look at the portfolio management process from the point of view of risk management, but also to draw a line between investment and speculative portfolio management strategies. Thus, adjusting the performance of the portfolio for risk will in practice avoid situations where high returns indicate not a serious potential for investment decisions, but a significant level of exposure of the portfolio to a particular risk.