Chain sub-period returns to measure investment performance independently of cash flow timing.
Time-weighted return links sub-period returns geometrically, which removes the effect of deposit and withdrawal timing. It is the standard for judging a manager, because they do not control when clients add money. The arithmetic average always overstates realised growth when returns vary, and the gap — volatility drag — widens with the size of the swings.
Time Weighted Return
TWR = (1 + r₁)(1 + r₂)…(1 + rₙ) − 1
TWR = (1 + r₁)(1 + r₂)…(1 + rₙ) − 1 Time-weighted return links sub-period returns geometrically, which removes the effect of deposit and withdrawal timing. It is the standard for judging a manager, because they do not control when clients add money.
The arithmetic average always overstates realised growth when returns vary, and the gap — volatility drag — widens with the size of the swings.
This calculator takes 4 inputs: Period 1 return, Period 2 return, Period 3 return, Period 4 return. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.