{"templateId":"markdown","sharedDataIds":{"sidebar":"sidebar-sidebars.yaml"},"props":{"metadata":{"markdoc":{"tagList":[]},"type":"markdown"},"seo":{"title":"Performance Calculations","description":"Fondo is the ground breaking open finance platform that lets you focus on what matters","llmstxt":{"hide":false,"sections":[{"title":"Table of contents","includeFiles":["**/*"],"excludeFiles":[]}],"excludeFiles":[]}},"dynamicMarkdocComponents":[],"compilationErrors":[],"ast":{"$$mdtype":"Tag","name":"article","attributes":{},"children":[{"$$mdtype":"Tag","name":"Heading","attributes":{"level":1,"id":"performance-calculations","__idx":0},"children":["Performance Calculations"]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":["Two main approaches are typically used for presenting performance over time for a portfolio of fund holdings - Time-Weighted Return (TWR) and Money-Weighted Return (MWR)."]},{"$$mdtype":"Tag","name":"Heading","attributes":{"level":3,"id":"time-weighted-return-twr","__idx":1},"children":["Time-Weighted Return (TWR)"]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":["Performance of the investments themselves, independent of the timing/size of client deposits and withdrawals (matches how fund factsheets report)."]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["How it's computed (conceptually):"]}]},{"$$mdtype":"Tag","name":"ol","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":["Split the timeline at every external cash flow."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["Compute a sub-period return for each flow-free segment."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["Chain (geometrically multiply) the sub-period returns."]}]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Sub-period i:"]}]},{"$$mdtype":"Tag","name":"CodeBlock","attributes":{"header":{"controls":{"copy":{}}},"source":"rᵢ = (UBᵢ − CFᵢ) / IBᵢ − 1\n"},"children":[]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Chain across n sub-periods:"]}]},{"$$mdtype":"Tag","name":"CodeBlock","attributes":{"header":{"controls":{"copy":{}}},"source":"TWR = ∏(1 + rᵢ) − 1\nfor i = 1 to n\n"},"children":[]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Pros/Cons & usage:"]}]},{"$$mdtype":"Tag","name":"ul","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":["✅ Neutralizes client cash flows → fair view of manager/strategy skill."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["✅ Standard for public performance comparisons."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["⚠️ Not the investor's personal experience if they time cash flows poorly/well."]}]},{"$$mdtype":"Tag","name":"Heading","attributes":{"level":3,"id":"money-weighted-return-mwr","__idx":2},"children":["Money-Weighted Return (MWR)"]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":["The investor's actual, cash-flow-timing-aware return on capital. Formally the internal rate of return (IRR) of all dated cash flows:"]},{"$$mdtype":"Tag","name":"CodeBlock","attributes":{"header":{"controls":{"copy":{}}},"source":"Σ CFₜ / (1 + r)^(t/T) = 0\n"},"children":[]},{"$$mdtype":"Tag","name":"ul","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"code","attributes":{},"children":["CFₜ"]}," are dated cash flows (deposits positive, withdrawals negative; final value treated as an outflow)."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"code","attributes":{},"children":["T"]}," normalizes time units (e.g., days per year)."]}]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Practical approximation — Modified Dietz:"]}]},{"$$mdtype":"Tag","name":"CodeBlock","attributes":{"header":{"controls":{"copy":{}}},"source":"r_MD = (EV − BV − Σ CFₖ) / (BV + Σ wₖ × CFₖ)\n"},"children":[]},{"$$mdtype":"Tag","name":"ul","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"code","attributes":{},"children":["BV"]}," = beginning value, ",{"$$mdtype":"Tag","name":"code","attributes":{},"children":["EV"]}," = ending value"]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"code","attributes":{},"children":["CFₖ"]}," = each external cash flow during the period"]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"code","attributes":{},"children":["wₖ"]}," = time weight for each flow (fraction of the period remaining after the flow)"]}]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Pros/Cons & usage:"]}]},{"$$mdtype":"Tag","name":"ul","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":["✅ Reflects the client's real, dollar-weighted outcome."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["✅ Useful for personal statements, planning, and advisor reviews."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["⚠️ Not ideal for comparing manager skill (timing dominates)."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":["⚠️ IRR can be non-unique or fail with certain cash-flow patterns; Modified Dietz is a robust proxy."]}]},{"$$mdtype":"Tag","name":"Heading","attributes":{"level":3,"id":"in-the-fondo-context","__idx":3},"children":["In the Fondo context"]},{"$$mdtype":"Tag","name":"ul","attributes":{},"children":[{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Displayed portfolio performance (%) — TWR:"]}," We present time-weighted return, consistent with fund factsheets and isolated from external cash flows."]},{"$$mdtype":"Tag","name":"li","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Client-specific performance — MWR/IRR is not supported."]}," For questions like ",{"$$mdtype":"Tag","name":"em","attributes":{},"children":["\"How did my money grow given when I invested?\""]}," you'd use a ",{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["money-weighted"]}," method rather than TWR."]}]},{"$$mdtype":"Tag","name":"p","attributes":{},"children":[{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["Note:"]}," Beyond deposits and withdrawals, other events (e.g., ",{"$$mdtype":"Tag","name":"strong","attributes":{},"children":["corporate actions, distributions, and fees"]},") can affect performance and must be taken into account to ensure adequate TWR calculations."]}]},"headings":[{"value":"Performance Calculations","id":"performance-calculations","depth":1},{"value":"Time-Weighted Return (TWR)","id":"time-weighted-return-twr","depth":3},{"value":"Money-Weighted Return (MWR)","id":"money-weighted-return-mwr","depth":3},{"value":"In the Fondo context","id":"in-the-fondo-context","depth":3}],"frontmatter":{"seo":{"title":"Performance Calculations"}},"lastModified":"2026-02-22T17:51:53.000Z","pagePropGetterError":{"message":"","name":""}},"slug":"/guides/fondo-wiki/performance-calculations","userData":{"isAuthenticated":false,"teams":["anonymous"]},"isPublic":true}