Portfolio Manager Control Considerations in Leveraged Senior Loan Performance Attribution

Portfolio managers review performance attribution for insights into good and bad decisions so that they can formulate even better future strategies. As a general rule, performance attribution models disaggregate active investment decisions. In some asset classes, however, a portion of the return follows from features common to the investment universe and, therefore, not impacted by the portfolio manager. This article proposes that performance attribution models should explicitly measure contribution from factors outside portfolio manager control in order to properly dimension the variables that the manager can impact. As a framework to analyze the thesis, the article constructs a performance attribution model for leveraged senior loans, an increasingly popular asset class that has not received much attention in performance literature.