The return shows a specific fund’s equity change due to trading activity from inception until the present. It is calculated as the time-weighted rate of return, which is used to evaluate the Portfolio Manager’s returns and eliminates the distortion of return rates by deposits and withdrawals.
Return calculation
Firstly, any balance operations such as deposits, withdrawals, and internal transfers divide the entire period into sub-periods. The rate of return for each period is calculated and multiplied to produce the final rate percentage. Whenever a PM makes a deposit or withdrawal, the return calculation is not influenced to prevent artificial results.
Note: The return is constantly updated and compounds over time.
Investment return drift
When investing in a fund, there could be differences between the fund’s return and the Investors’ investment return. This may be caused by the time at which the investment was initiated can affect the investment return. Performance drift can sometimes be an advantage or a disadvantage.
For example, suppose an investment was started when the fund had a drawdown. In that case, a relatively small increase in the fund’s return will cause a more significant return on your investment performance.