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The Handbook of Municipal Bonds by FRANK J. FABOZZI, SYLVAN G. FELDSTEIN

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CHAPTER 42
Performance Attribution of Municipal Bonds
Daniel J. Garrett, CFA Vice President Investortools, Inc.
 
 
 
Performance is the ultimate measure of success in investing. Investing performance is typically expressed as total return, the measure of income and price change over a period of time for a single investment or group of investments. Performance drives assets accumulated, fees, profits and pay of everyone in an investing institution. As such, the attention paid to total return has become more focused, particularly in relationship to the total return of an index with similar investment objectives and constraints.
One of the most difficult tasks of a portfolio manager, in any asset class, is to tell the story of how day-to-day decisions translate into total return performance. The difficulty is accurately backing claims with facts and figures to illustrate the point. The presentation of these claims in marketing material is of interest to regulators (Securities and Exchange Commission) and those interested in maintaining integrity within the investment profession (CFA Institute, among others). Because total return is a key part of what investors consider in their choice of who will manage their money, nearly everyone from the investment boards who hire portfolio managers to the wealthy individual or young worker choosing their first 401k account have a vested interest in accurate reporting of total return.
However, a single total return number is often not enough to ...

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