What Is an Adjudication?

An adjudication is a legal ruling or judgment, usually final, but can also refer to the process of settling a legal case or claim through the court or justice system, such as a decree in the bankruptcy process between the defendant and the creditors.

Normally, an adjudication represents the final judgment or pronouncement in a case that will determine the course of action taken regarding the issue presented. Outside of a legal process, adjudication can also more generally refer to other formal processes of judgment or ruling that render a final decision, such as the process of validating an insurance claim.

Understanding Adjudication

Adjudication describes the legal process that helps expedite and deliver a court’s resolution regarding an issue between two parties. The result of the process is a judgment and court opinion that is legally binding. Most adjudication hearings center on disputes that involve money or nonviolent infractions and result in the distribution of rights and obligations for all parties involved.

This legal process differs from other justice-seeking or evidence-based court cases. It is instead used to settle disputes between private parties, political officials and a private party, and public bodies and public officials. In the healthcare industry, for example, adjudication can determine a carrier’s liability for monetary claims submitted by an insured person.

Adjudication Disputes

The types of disputes handled or resolved through adjudication include the following:

• Disagreements between private parties, such as single-persons, individual entities, or corporations
• Disagreements between private parties and public officials
• Disagreements between public officials and/or public bodies

Requirements for full adjudication include requisite notice to all interested parties (all legally-interested parties or those with a legal right affected by the disagreements) and an opportunity for all parties to have their evidence and arguments heard.

The Adjudication Process

Formal rules of evidence and procedure govern the process where the initiating party, or trier, gives a notice establishing the facts in controversy and defines any applicable laws. The notice also sometimes outlines the nature of the dispute between the parties and recounts where and when the dispute occurred, and the desired result based on law. However, there are no specific requirements regarding the notice of adjudication.

An adjudicator is then appointed and a notice is sent to the defending party, who responds by submitting a defense to the claim of adjudication by the plaintiff. The adjudicator gives the plaintiff and defendant a chance to present their arguments at a hearing and makes a final ruling. This is not too dissimilar from an arbitrator in an arbitration hearing settling a business dispute.

What Is AARP?

The American Association of Retired Persons, commonly known by its acronym AARP, is America’s leading organization for people aged fifty and older, providing member benefits, marketing services, and lobbying on their behalf.

Founded in 1958 by retired educator Dr. Ethel Percy Andrus as the American Association of Retired Persons, AARP is a nonprofit, nonpartisan association with a membership of more than 38 million.

How AARP Works

AARP provides information, education, research, advocacy, and community services through a nationwide network of local chapters and experienced volunteers. It focuses its work on consumer issues, economic security, work, health, and independent living issues, and engages in legislative, judicial, and consumer advocacy in these areas.

AARP is considered a powerful lobbying group as well as a successful business, selling life and health insurance, investment products, and other financial and non-financial services. It is also an independent publisher, offering Modern Maturity magazine and the monthly AARP Bulletin. AARP produced $1.70 billion in revenue in 2019, which came from a variety of endeavors, including advertising revenue from its publications, and from royalties for licensing its name and logo.

However, membership fees represent the most significant source of revenue. It is registered as a 501(c)(4) non-profit by the Internal Revenue Service (IRS), which means it is permitted to engage in lobbying. It also administers some 501(c)(3) public charity operations while some of its other operations are for-profit.

AARP Affiliates

There are several AARP-affiliated organizations, and they include the following:

• The AARP Foundation is a non-profit charity that assists people over age 50 who may be at economic and social risk. Within the foundation operates AARP Experience Corps., which encourages tutoring and mentoring of children, and AARP Institute, which holds its gift annuity funds.
• AARP Services develop and manage new products and services and are for-profit.
• Legal Counsel for the Elderly is a non-profit that provides legal services for seniors in Washington, D.C.
• AARP Financial Services holds AARP real estate and is for-profit.
• The AARP Insurance Plan administers some AARP group insurance plans.

AARP also has many other initiatives, including promoting driver safety (AARP Driver Safety), producing television programming that targets seniors, and engaging in sponsorships that support social causes, such as raising awareness of and fighting hunger in America.

AARP manages outreach programs that address housing issues and social isolation among seniors. AARP has also initiated and managed programs that advocate for the strengthening of Social Security and Medicare.

Criticism of the AARP

AARP is one of the strongest lobbying groups in America, and because of its efforts, it often receives attention for exerting its influence in Washington, D.C., and in state capitals. Its non-profit operations also receive millions of dollars per year in the form of federal grants. Some argue that its positions fall into the more liberal part of the political spectrum.

What Is Attribution Analysis?

Attribution analysis is a sophisticated method for evaluating the performance of a portfolio or fund manager. Also known as “return attribution” or “performance attribution,” it attempts to quantitatively analyze aspects of an active fund manager’s investment selections and decisions—and to identify sources of excess returns, especially as compared to an index or other benchmark.

For portfolio managers and investment firms, attribution analysis can be an effective tool to assess strategies. For investors, attribution analysis works as a way to assess the performance of fund or money managers.

How Attribution Analysis Works

Attribution analysis focuses on three factors: the manager’s investment picks and asset allocation, their investment style, and the market timing of their decisions and trades.

The method begins by identifying the asset class in which a fund manager chooses to invest. An asset class generally describes the type of investments that a manager chooses; within that, it can also get more specific, describing a geographical marketplace in which they originate and/or an industry sector. European fixed income debt or U.S. technology equities could both be examples.

Then, there is the allocation of the different assets—that is, what percentage of the portfolio is weighted to specific segments, sectors, or industries. 

Specifying the type of assets will help identify a general benchmark for the comparison of performance. Often, this benchmark will take the form of a market index, a basket of comparable assets.

Analyzing Investment Style

The next step in attribution analysis is to determine the manager’s investment style. Like the class identification discussed above, a style will provide a benchmark against which to gauge the manager’s performance.

The first method of style analysis concentrates on the nature of the manager’s holdings. If they are equities, for example, are they the stocks of large-cap or small-cap companies? Value- or growth-oriented?

American economist Bill Sharpe introduced the second type of style analysis in 1988. Returns-based style analysis (RBSA) charts a fund’s returns and seeks an index with comparable performance history. Sharpe refined this method with a technique that he called quadratic optimization, which allowed him to assign a blend of indices that correlated most closely to a manager’s returns.

Explaining Alpha

Once an attribution analyst identifies that blend, they can formulate a customized benchmark of returns against which they can evaluate the manager’s performance. Such an analysis should shine a light on the excess returns, or alpha, that the manager enjoys over those benchmarks.

The next step in attribution analysis attempts to explain that alpha. Is it due to the manager’s stock picks, selection of sectors, or market timing? To determine the alpha generated by their stock picks, an analyst must identify and subtract the portion of the alpha attributable to sector and timing. Again, this can be done by developing customize benchmarks based on the manager’s selected blend of sectors and the timing of their trades. If the alpha of the fund is 13%, it is possible to assign a certain slice of that 13% to sector selection and timing of entry and exit from those sectors. The remainder will be stock selection alpha.

Market Timing and Attribution Analysis

Though some managers employ a buy-and-hold strategy, most are constantly trading, making buy and sell decisions throughout a given period. Segmenting returns by activity can be useful, telling you if a manager’s decisions to add or subtract positions from the portfolio helped or hurt the final return—vis-à-vis a more passive buy-and-hold approach.

Enter market timing, the third big factor that goes into attribution analysis. A fair amount of debate exists on its importance, though.

Certainly, this is the most difficult part of attribute analysis to put into quantitative terms. To the extent that market timing can be measured, scholars point out the importance of gauging a manager’s returns against benchmarks reflective of upturns and downturns. Ideally, the fund will go up in bullish times and will decline less than the market in bearish periods.

Even so, some scholars note that a significant portion of a manager’s performance with respect to timing is random, or luck. As a result, in general, most analysts attribute less significance to market timing than asset selection and investment style.