ABSTRACT
This chapter proposes an attribution model for monitoring the performance and risk of a de ned bene t pension fund. In order to facilitate easy interpretation of the results, the return is expressed as a percentage of the value of the liabilities. e model is based on a liability benchmark that re ects the risk and return characteristics of liabilities. As a result, the attribution model focuses the attention of the portfolio managers on creating a portfolio that replicates liabilities. e attribution model allocates di erences in return between the actual and benchmark portfolio to decisions relative to the benchmark portfolio. In addition, the model decomposes risks according to the same structure by using a measure of downside risk.
