Explanations of performance numbers

TWR vs IRR

Time-Weighted Return (TWR) ignores the impact of cash flows during performance calculations. What this means is the performance period is broken up into multiple sub-periods based on each inflow or outflow in an account or portfolio. The performance is calculated for each sub-period and then combined to get a total TWR. This calculation is agnostic to the quantity of the inflow or outflow across sub-periods but approaches each one separately prior to linking for the total TWR result.

TWR is most suitable for fund managers who have no control over the end client’s flows.

On the other hand, Internal Rate of Return (IRR) accounts for the timing and quantity of each flow assigning a weight to each when calculating the final result. If you add $100 to your account on Day 1 and another $10,000 later on Day 20, the performance on the $10,000 will carry a greater weight than the performance on the original $100.

IRR is most suitable for clients because they have control over the inflows and outflows. In some cases, TWR can provide a skewed look at the performance of your account or portfolio because it ignores the flow quantity. If there are no cash flows over the performance period, the two values should be equal.

Where performance numbers are displayed on the platformWhere performance numbers are displayed on the platform
Performance report
  1. Account Header (TWR) + annualization – The Return % displayed at the top of your report is TWR. If the selected period is equal to, or greater than one year, this value will be annualised using a compounding method.
    • Opening Balance –The value of your account or portfolio at the start of your selected date range.
    • Net deposits and withdrawals – The summation of all deposits and withdrawals from your account/portfolio.
    • Investment return – All gains, losses, and income over the selected date range.
    • Closing balance - The value of your account or portfolio at the end of your selected date range.
  2. Chart (TWR) – The chart graphically displays daily TWR returns for both the account/portfolio and the selected benchmark over a selected period of time.
  3. Portfolio Header (TWR) + annualization – For portfolio specific returns, the Return % displayed is TWR. Regardless of the account aging, if both the selected period and the portfolio inception date is equal to, or greater than one year, this value will be annualised using a compounding method. If the portfolio aging is less than one year as at the end date of the selected reporting period, the return value will not be annualised even if the account returns meet the criteria for annualization.
  4. Security Gains/Losses – All pre-tax marked to market gains or losses for each holdings, including the impact of foreign exchange movements over your selected period and any income attributed to the security. If your account is in our Retail Super product, this value will include franking credits earned. If your account is not in our Retail super product, franking credits do not make up part of this value. Note: Franking credits are currently included in security gains/losses but will be removed in the future.

Summary Performance Report

  1. Account Header (IRR) +annualization – The Return % displayed at the top of your report is IRR. If the selected period is equal to, or greater than one year, this value will be annualised using a compounding method.
    • Opening Balance –The value of your account or portfolio at the start of your selected date range.
    • Net deposits and withdrawals – The summation of all deposits and withdrawals from your account/portfolio.
    • Investment return – All gains, losses, and income over the selected date range.
    • Closing Balance – The value of your account or portfolio at the end of your selected date range.
  2. Portfolio Header (IRR) + annualization – For portfolio specific returns, the Return % displayed is IRR. Regardless of the account aging, if both the selected period and the portfolio inception date is equal to, or greater than one year, this value will be annualised using a compounding method. If the portfolio aging is less than one year as at the end ate of the selected reporting period, the return value will not be annualised even if the account returns meet the criteria for annualization.

On-screen Performance Page

  1. IRR +annualization – The Return % displayed under IRR. If the selected period is equal to, or greater than one year, this value will be annualised using a compounding method.
  2. TWR +annualization – The Return % displayed under TWR. If the selected period is equal to, or greater than one year, this value will be annualised using a compounding method.
  3. Chart (TWR) – The chart graphically displays daily TWR returns over a selected period of time.
  4. Calendar Period Returns based on period selection – The 1 month – 3 years data will use an end date of the most recently completed month based on your selected date range. If you select 15/08/2020 as your end date, the one month return value will be calculated from 01/07/2020 – 31/07/2020. Any period equal to, or greater than one year will be annualised using a compounding method.
  5. Data Table
    • Capital in
      • Inclusive/exclusive of Super tax (Super vs. Wealth)
    • Capital out – Any flows out of your account/portfolio including cash or security transfers
    • Interest – Interest earned on your cash balances
    • Dividends & Coupons – All income from dividends, coupons, and distributions on a pre-tax basis. If your account is in our Retail Super product, this value will include franking credits earned. If your account is not in our Retail super product, franking credits do not make up part of this value.
    • Fees – All fees paid to Mason Stevens, your Adviser, and any applicable model manager.
    • Insurance – Insurance payments (Super only)
    • Tax (Super vs. Wealth) – If your account is an accumulation account in our Retail Super product, this value will include the 15% super tax and any applicable foreign withholding tax (FWT). If your account is not an accumulation acount in our Retail super product, this will include any applicable FWT and RWT.
    • Gains/losses – All pre-tax marked to market gains or losses on your account/portfolio holdings, including the impact of foreign exchange movements over your selected period.

On-screen Dashboard

  1. Header (IRR) +annualization
      • Opening Balance – Represents the value of your account or portfolio at the start of your selected date range.
      • Net deposits and withdrawals – The summation of all deposits and withdrawals from your account.
      • Investment return – Represents all gains, losses, and income over the selected date range.
      • Closing balance – The value of your account at the end of your selected date range.
      • Calendar Period Returns based on period selection – If you select a period that is not “Since inception”, you will get the return period ending on the last day of the most recently completed month.
 
Was this article helpful?
0 out of 0 found this helpful