Eagle's performance attribution component analyzes the source of a single currency and multicurrency portfolio's returns for equity portfolios as well as fixed income portfolios. You can choose the methodology that is right for your needs and take advantage of the multi-period linking across multiple time periods.
The Brinson-Fachler model decomposes the portfolio's return into currency, cross product, allocation, selection, and interaction effects. The calculation of asset allocation is based on the difference in portfolio weight and benchmark weight combined with the differential between the specific sector index return and the overall benchmark. It differentiates between incremental returns above the market. The calculation of currency is based on the ratio of the currency return of the portfolio relative to the currency return of the benchmark. This approach does not include the return premium identified by the Karnosky-Singer model.
The Karnosky-Singer model decomposes a multicurrency portfolio's return into currency selection, market selection, and security selection effects. It defines the market selection effect in terms of return premiums, leading to true separation of the market selection and currency selection effects. Currency hedging attempts to minimize the risk that is involved in holding foreign investments by modifying currency exposures that naturally result from purchasing the portfolio's investments. Four currency hedging methodologies are supported. You can choose not to synthetically hedge. Or, you can simulate one of three synthetic hedging options.
The Fixed Income Attribution model is designed to meet the needs of bond managers who need a detailed decomposition of total bond returns. Using a returns-based methodology, the Fixed Income Attribution model disaggregates the portfolio's return into multiple bond characteristics that measure the exposure to duration, the changing shapes of yield curves, credit spreads, and other relevant factors. It uses a standard Brinson-Fachler single factor equity style attribution methodology to decompose the total spread into allocation, selection, and interaction effects.
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