What Has the Manager Done for Me? A Value-Based Solution to the Measurement of Fund Performance in Relation to a Benchmark

This paper presents a method of performance measurement and attribution analysis which is based on values rather than returns. The difference in final values between a managed fund and its benchmark provides an exact measure of the contribution of the fund manager to the wealth of investors. It is natural for investors to be interested in the manager’s contribution, as well as in the manager’s skill. The paper shows that working with values is relatively simple and transparent, that it is free from most of the problems of multiperiod attribution analysis, and that it enables precise customized analyses to be made of the manager’s contribution for each investor in a fund.