Nearly 30 years since its creation, the Investment Decision Process (IDP) model remains a cornerstone tool for asset owners seeking to understand how individual investment decisions contribute to total fund performance. Ortec Finance, the firm behind the model, has revisited its origins and outlined where it is heading next.
The model emerged at a time when performance attribution was still a nascent discipline. Jeroen Geenen, one of the IDP’s original developers, explained that the methods available at the time — chiefly the Brinson-Fachler and Brinson-Hood-Beehower models — were too simplistic to reflect how institutional investors actually made decisions.
Ortec Finance managing director, investment performance, Elske van de Burgt noted that clients required a framework acknowledging multiple layers of decision-making, spanning strategic, tactical and operational levels, along with a means of accounting for interaction effects that no single decision-maker could be said to own.
The solution the team arrived at was elegant in concept, though demanding in execution. By arranging the Brinson model into a hierarchical structure — where selection effects at each level could be broken down further into allocation and selection effects through nested secondary and tertiary models — the team created what Geenen described as functioning like a set of babushka dolls, or in more technical terms, a hierarchical telescoping sum. This recursive approach allowed the framework to mirror a fund’s actual investment decision process precisely.
Van de Burgt stressed that at its core the model rests on a principle that attribution cannot create or destroy value, meaning all contributions from every step must reconcile exactly to the total result.
Translating the model into Ortec Finance’s performance measurement and attribution solution, PEARL, brought its own complexities. Because no two investors’ decision processes are identical, the team had to build software flexible enough to allow users to configure their own decision hierarchies rather than relying on a static, predefined structure. Over time, this evolved into PEARL’s current setup, which allows full user specification and adjustment of a fund’s IDP as part of system configuration. A concept of time dependency was also introduced, allowing the IDP to evolve as investment strategies change whilst preserving a historical record of how the structure looked at any given point.
The challenges that originally motivated the IDP’s creation have not disappeared — if anything, they have deepened. Van de Burgt pointed to the growth of derivatives, private assets and overlay strategies as factors adding considerable complexity to the decision-making environment. The ability to measure the impact of overlays — used by funds to hedge currency, inflation and interest rate risks, as well as to implement dynamic asset allocation tilts — has become increasingly critical as the size of such strategies grows.
Looking ahead, Ortec Finance has identified three areas where the IDP model must continue to develop. The first is supporting the total portfolio approach (TPA), an increasingly popular framework among large asset owners that presents particular challenges in capturing and representing factors on an ex-post basis.
The second is ESG attribution, with the firm having already developed a model in collaboration with Dutch fiduciary manager MN to measure non-financial metrics in a manner consistent with how risk and return are assessed.
The third is improving integration between private and public asset analytics at the total-fund level, addressing the distinctive challenges posed by illiquidity, valuation and benchmarking in private markets.
For more insights, read the full discussion here.
Copyright © 2026 FinTech Global
