Unearthing the roots of fund performance

Analysts use Morningstar's attribution metrics to help assess a fund manager's ability.

Adam Zoll 8 December, 2014 | 6:00PM

Question: In some mutual fund Analyst Reports, Morningstar analysts refer to performance attribution as a way to determine whether a manager is good at choosing stocks. How is this analysis done?

Answer: Performance attribution analysis is a method used by analysts at Morningstar and elsewhere to help determine why a fund performed the way it did during a given time period. Did the fund underperform relative to its benchmark because of a few bad stock picks, or was it because the fund invested too heavily in a poorly performing sector of the market? If a fund outperformed its benchmark, is it because the manager chose the right stocks to invest in, or because he or she managed to avoid stocks that would have weighed down performance? These are the sorts of questions performance attribution analysis can help answer.

Giving credit where credit is due

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
AltaGas Ltd15.99 CAD2.57
Constellation Software Inc1,612.38 CAD-1.04
Equitable Group Inc68.42 CAD2.81
Stella-Jones Inc36.61 CAD2.33

About Author

Adam Zoll

Adam Zoll  Adam Zoll is an assistant site editor with Morningstar.com

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