What is the primary focus of performance attribution?

The primary focus of performance attribution is indeed to investigate sources of performance relative to a specific benchmark. This involves breaking down the returns of a portfolio to understand how much of the performance is attributable to various factors, such as asset allocation decisions, stock selection, or timing. By comparing the portfolio's performance to that of a benchmark, analysts can identify which decisions contributed positively or negatively to returns. This analysis helps investors understand the effectiveness of the investment strategies employed and can guide future investment decisions.

Understanding performance attribution is crucial in portfolio management, as it allows managers and clients to assess the added value of active management versus passive benchmarks and to make informed decisions about adjustments needed in investment approaches. It plays a key role in investment evaluation and in ensuring accountability in investment performance.