Separate the part of investment results due to the asset owner's decisions from the part due to the manager, and interpret each

The asset owner, such as a sponsor's investment committee, sets the strategic asset allocation and chooses the benchmarks and managers; each manager answers only for performance against its mandate benchmark. Macro attribution peels the total fund return into layers: the return of the policy portfolio, the effect of the owner's deviations from policy weights and benchmark choices, and the managers' combined active return. Suppose the fund returns 8.0%, the policy benchmark 7.0%, and a blend of the managers' own benchmarks at actual weights 7.4%. Then 0.4% came from the owner's allocation and benchmark decisions and 0.6% from the managers' value added. The trap is blaming or rewarding managers for results driven by the policy mix, such as a weak year for strategic equities.