“Russell/Mellon Analytical Services is publicly releasing the method behind its premier performance attribution product.The previously confidential mathematical methodology known as Russell Multiperiod Linking Methodology, provides the intellectual capacity to Russell/Mellon Performance Attribution, or RPA, a product that reveals and analyzes the sources of value added to investment portfolios.The Russell methodology is being published in an edition of The Journal of Performance Measurement. Russell previously had made public its Ankrim/Hensel methodology for single-period attribution years ago, but this publication marks the first release of the company’s confidential method for linking single-period attribution results over time.“The intellectual brainpower behind this product has proven its worth to our clients for 12 years now,” said Mark Hansen, managing director, West Coast operations, Russell/Mellon Analytical Services. “We’ve received requests from clients for some time to release the methodology in order to help them communicate about it with their clients.”Frank Russell Company, headquartered in Tacoma, was the first to develop this multiperiod linking methodology, introduced in 1987. Since Russell/Mellon Analytical Services uses RPA methodology with most of its clients’ assets worldwide, it has become one of the most commonly used methodologies in the industry.“We believe that attribution based on frequent measurement periods is important in understanding what happened in the investment process,” said David Carino, a research fellow at Frank Russell. “Development of this algorithm enabled us to cumulate results from short time periods over longer time intervals.”Carino had written a Russell research commentary explaining Russell’s linking algorithm and how the methodology benefits portfolio analysts and plan sponsors.The investment community uses three widely accepted approaches to attribution analysis: geometric, additive and static. The RPA methodology combines these approaches in that the underlying linking method is geometrically based, but the attribution effects are designed to add up, making results easier to understand for clients.John Stannard, managing director of Russell’s operation in the United Kingdom and recently appointed Chairman of the Association for Investment Management and Research’s new global Investment Performance Council, has been involved in the debate on performance issues for some time.“Releasing this once confidential methodology should help fuel the debate on setting standards for attribution methodology,” Stannard said. “I believe it makes more sense for all users to have a common approach to attribution, rather than to get caught up in minutia.”Stannard, who had taken a leading role in development of the RPA software, said clients need results in order to make judgements and decisions, and to not get bogged down over the mechanics.Russell’s approach to attribution analysis generates benchmark-relative analysis that is reflective of the investment process. Russell/Mellon offers the approach in both hard copy and software to clients worldwide.The hard copy service examines the management style of a multicurrency portfolio and compares the source of a portfolio’s return against the market. It calculates performance and identifies where value was added by attributing returns to asset allocation, security selection and currency decisions. Using proprietary algorithms, the quarterly report compares a client’s portfolio to relevant indexes and universes of peer-group manager portfolios.The desktop software companion product assists managers and institutional investors to interpret data and create meaningful performance attribution reports. The system features benchmark-relative attribution for identifying sources of excess returns in the portfolio. Using the proprietary algorithm, a client can run attribution for any desired time period.RPA also provides multicurrency attribution allowing a client to analyze the impact of currency decisions on the portfolio.Russell/Mellon Analytical Services is a 50/50 joint venture launched earlier this year by Mellon Trust and Frank Russell Company. It provides performance measurement products and analytical tools to a client base representing over $2 trillion in assets worldwide.The company employs about 400 people and operates from principal offices in Tacoma, Boston and Pittsburgh. It operates service offices in Dallas and San Francisco and has representatives in Auckland, Amsterdam, Copenhagen, London, Paris, Singapore, Sydney, Tokyo and Toronto.”