These are projects posted by the students of Dr. Gove Allen at Brigham Young University. These students have taken one semester-long course on VBA and generally have had no prior programming experience

Friday, December 4, 2015

Performance Attribution

Silverfund is BYU’s student-managed investment portfolio, comprised of approximately $3M equity and $5M fixed income. Each year (fall/winter semesters) a team of twelve MBA students are selected from the finance majors to manage the portfolio. Ownership of the fund begins in October and ends at the end of March, during which time they are allowed to trade on behalf of the portfolio. Fixed income trades are limited to AAA rated US bonds (corporate, treasuries, municipals) that mature before the end of April. On the equity side there are very few restrictions and purchases (and shorts) of any stock are permitted. The benchmark against which the equity portion is measured is 80% S&P 500, 20% Russell 2000, and Silverfund is ‘encouraged’ to maintain this weighting.

Performance attribution is the dis-aggregation of performance (returns relative to the benchmark; alpha) into its constituent components, primarily allocation and selection. Allocation is measuring the impact of allocating funds between different asset classes, stock types, industries, sectors etc.Selection measures the impact of choosing particular stocks within those areas of allocation. In addition to allocation and selection, the impact of currency movements and hedging activities can also be included in the analysis. Performance attribution is a huge business and asset managers who do not perform this analysis in-house will contract external providers, at significant cost, to perform this analysis for them on a regular basis.

This project aims to automate the otherwise complicated maintenance process of the performance attribution spreadsheet created by this year's Silverfund team. By eliminating the manual manipulation of data within the spreadsheet we have been able to ensure a higher level of accuracy and minimize the risk of errors, as well as speeding up the process significantly. In addition, we have added other useful features that would not be possible without the use of VBA. This spreadsheet covers the equity portion of the portfolio and the selection impact (alpha contribution).

1 comment:

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