Performance Calculations

This document details how calculates performance.

Computation of returns

The returns in this system are computed based on the Modified Dietz calculation. Returns are calculated for every date and asset class where a market value is available. Return periods are defined as the number of days between entered market values. For example, if a market values are input on 3/1/2010 and 3/20/2010, a return will be calculated for this 19 day time period. The system will weight all flows for the return period. Market values can be entered for any date.

All market values are assumed to be end-of-day values.

When a single cash flow represents more than 10% of the total market value for an asset class, it is recommended that you include the market value of the asset class at the time immediately following the cash flow. This will provide a more accurate return and keep your performance metrics compliant with industry standards. The data engine currently supports this standards compliant performance calculation method but will not require or enforce it.

Summation of market values

Multiple market values entered for the same date and asset class will be summed.

Generating market values

There are instances when a return must be calculated for a period where there is no entered ending market value. For instance, if the user manually enters a date range for a return, a market value must be available for the start and end date of that date range. If market values are not available, the system will generate market values based on the returns and flows of the known period. This will provide excellent estimations of market values and returns for dates where that data would otherwise be unavailable.

Generating market values for dates on-demand makes the system extremely flexible and powerful. It allows you to generate meaningful reports even when your data is incomplete. To eliminate the need for estimating market values, you may enter your data conforming to these rules:

  • All sectors of an account should have aligned market values. (We can refer to market values that occur on the same day as 'aligned'.)
  • All members of a composite account should have aligned market values.
  • Choose custom date ranges and report start and end dates only for dates where market values have been input.

Simple and expert modes

The differences between simple and expert mode data entry are detailed below:

  • In simple mode, all withdrawals, contributions, and fees are entered at the 'Cash' level. In expert mode, those transactions are entered at the 'Total' level.
  • In simple mode, for every user entered flow, the system generates an equal but opposite transaction for the cash sector. For instance, a positive purchase of equity will generate a negative sale of cash. Likewise, a negative sale of equity will generate a positive purchase of cash. In expert mode, these double-entry transactions must be entered explicitly.
  • In simple mode, the system keeps track of your cash balance for you. In expert mode, you must enter market values for cash.
  • In simple mode, the system keeps track of your total fund by summing the market values of the underlying asset classes. In expert mode, you must enter total fund market values explicitly, and verify that they match the sum of the market values of the other sectors.

Non-aligned market values for asset classes of stand-alone accounts and members of composite accounts will be generated the same way in simple and expert mode. Simple and expert mode accounts may be combined in composites freely.

Weighted flows

For Free Memberships, the transaction engine will calculate weighted flows for all transactions. The system will sum weighted flows to calculate the weighted flow for the return period.

For some premium membership levels, you have the option to override system generated weighted flows. You are able to either enter your own weighted flow for an individual transactions, or enter a total weighted flow for the asset class' return period.

Total period weighted flows are entered in the performance input screen on the same line as the end-of-period market value transaction.

If a total return period weighted flow has been entered, and derived market values occur within the return period, all cash flows within the period will be reduced to a single cash flow on a date calculated based on the entered total return period weighted flow.