We present a performance attribution method for levered strategies. This method provides a framework for deciding whether and how much to lever. Essential ele- ments are forecasts for the expected return and volatility of the fully-invested source portfolio that is to be levered, borrowing rates, the covariance of strategy leverage with the excess return to the source portfolio over the borrowing rate, compounding effects and trading costs. In an empirical study, we show these elements provide a complete explanation of the realized returns of three levered low-risk strategies. For one of the strategies, market frictions cut friction-free cumulative returns over an 84-year period by a factor of 1000.