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CFA Level 1
Portfolio Management

Performance Attribution in Sector Rotation

Hard Performance Evaluation Performance Attribution

Consider a fund manager who employs a sector rotation strategy to enhance returns by overweighting certain sectors expected to outperform the market. At year-end, the manager reports a total return of 12%, while the benchmark index, which mirrors the average market sector weights, returns 8%. Performance attribution analysis reveals that the sector allocation strategy contributed +3% to the fund’s performance, and stock selection within those sectors contributed +1%. Given this information, which of the following best describes the total contribution to the fund's outperformance over the benchmark?

Hint

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% Correct91%