Performance Attribution for Active ETFs and Active Mutual Funds

Performance Attribution for Active ETFs and Active Mutual Funds

May 14, 2015 Investor Education, Tactical Asset Allocation Research
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(Last Updated On: May 13, 2015)

Peter Hecht, Ph.D., a fellow Chicago Finance PhD, and vice president of Evanston Capital Management, recently posted an article introducing a practical solution for active portfolios return attribution:

Active ETFs and active mutual funds are meant to beat the market either through superior stock selection or superior market timing–or both. Dr. Hecht emphasizes why it is so important that we critically decompose returns into alpha and beta:

“…the passive/rules based manager represents an opportunity cost to the investor who chooses to go active, and, thus, the active manager needs to beat this opportunity cost on a net of fee basis. Otherwise, there’s no reason for the active manager to exist.”

We all know that identifying alpha is important if we are going to pay managers extra fees to “beat the market.” However, as Dr. Hecht points out, it is difficult for investors to compare manager results due to the “lack of access to cheap, easy to use, easy to understand, consistent, ‘alpha measuring’ infrastructure.”

One solution may be under our noses…

Dr. Hecht higlights the Return Attribution function, which is free for existing Bloomberg users. 

Some features of the tool:

  1. Stock selection analysis
  2. Industry effect analysis
  3. Style/Beta exposure analysis

We fired the tool performance analysis tool on our Bloomberg and investigated some of our favorite active ETFs (we’re not huge fans of active mutual funds because of fees and taxes so we didn’t even look at any).

Overall, the tool is very cool! Check it out if you have a Bloomberg.

Read the full article if you are interested!


return attribution
screenshot from Bloomberg

Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.

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Definitions of common statistics used in our analysis are available here (towards the bottom)

About the Author

Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.