To inspect the output from FIA, numerous reporting options are available.
FIA's reports fall into three types:
- Predefined Excel reports
- CSV reports
- SQL data
Portfolio, benchmark and active reporting
Fixed income attribution differs from equity attribution in that the return of a portfolio can be decomposed by sources of risk without reference to a benchmark. In contrast, equity attribution (or any other type of attribution based on comparison of allocation weights) requires a benchmark.
FIA can handle all these cases:
- If a fixed income portfolio is supplied without a benchmark, reports will be generated for that portfolio.
- If a fixed income portfolio is supplied together with a benchmark, and no allocation effects are calculated, then FIA will generate reports for the portfolio, the benchmark, and any active return.
- If allocation effects are calculated, then a benchmark must be provided. In this case FIA's attribution reports will only show active return.
For reference, FIA calculates allocation effects when any of BrinsonAllocationSectors, CarryAllocationSectors, CurveAllocationSectors, SpreadAllocationSectors, ResidualAllocationSectors are active.
Reports that display performance contributions usually have some form of smoothing applied.
Whether they arise from individual securities, sectors, or portfolio risks, a fundamental property of return contributions is that they compound additively over markets, but geometrically over time. One outcome of this is that, for a portfolio where return is calculated over more than one time period, cross terms or compounding will distort the results and potentially obscure the true sources of return in a portfolio. For a detailed account of this subject, refer to Chapter 5 of Mastering Attribution in Finance, Colin, 2015 (FT Press/Pearsons).
FIA offers two of the most popular smoothing algorithms to smooth performance contributions and ensure that aggregate returns are always path-independent. These are Carino smoothing and geometric smoothing.