Why is there a conflict between my Absolute Return and Return in Percentage?
Time-Weighted Return (TWR) vs Absolute Return
Time-Weighted Return (TWR)
To calculate return as a percentage, Totality Capital Markets applies the industry-standard TWR methodology.
Absolute Return
Absolute Return measures performance by comparing the Account Value at time (t+1) vs Account Value at time (t), while adjusting for:
Potential Conflict Between TWR and Absolute Return
TWR does not consider portfolio size when calculating sub-period returns:
Illustrative Example
In the following case, the TWR is positive (+33%), but the Absolute Return is negative (-300) due to fluctuations in portfolio size and cash movements.
Would you like further insights or a more detailed breakdown of how TWR compares to Absolute Return in practical investment scenarios?