Attribution versus Allocation

Attribution and Allocation are two concepts that are used frequently in Portfolio Management. While they are related there are important nuances that differentiate their meaning (though usage may vary by field, region etc).

Attribution has a backward looking character, it aims to assign some current metric or outcome to elements of the portfolio (e.g. contribution to PnL). Allocation has instead a more forward looking character. It aims to grant a resource to some element of the portfolio (e.g., capital, trading limit etc.)
Attribution might involve a methodology that explains the assigned metric on the basis of past events. Allocation might instead determine a schedule on the basis of forecasts about future events (opportunities, risks etc)

Issues and Challenges

The difference is not always clear-cut as methodologies and internal portfolio management processes are mixing historical and forward looking views (the latter being in general always informed by the former).