Axxcess will generally report performance based on a Time Weighted return basis. With certain securities, where indicated, IRR will be used.

Axxcess will publish returns to investors on a net of fee basis, unless otherwise indicated.

Further Reading:

When evaluating an investment portfolio, you may simply want to know whether the portfolio had a gain or a loss during a certain period. Defining that gain or loss brought about the creation of performance measures. Performance measures are designed to produce numbers that represent percentage returns. They are designed to give relevant information on the total portfolio’s performance. The information should give a common means of measure against other investments and other portfolio managers. Although an evaluation requirement may be simple in nature, measuring performance and

the resulting return figures can become very complex. There are several ways to measure performance, and under given circumstances different performance measures will even produce different returns from the same data.

TWR- Time Weighted Return is the required measure by the Global Investment Performance Standards

(GIPS). It is used throughout the money management industry. The reasoning behind this is twofold. Firstly, a money manager may not directly control the timing or the amount of client contributions and withdraws from their portfolio. TWR gives a rate of return that eliminates the effects of cash flows.

Secondly, TWR is used by the money management industry because it measures how the money was managed. It attempts to show the investor how well their money was managed, whether the portfolio was worth $1,000 or $1,000,000. The TWR number can then be used in direct comparison with other managers’ TWRs for the same period.

DWR/IRR- A multi-period Dollar-Weighted Return (DWR) is also referred to as the Internal Rate of Return (IRR), because it will generate a discount rate where the present value of the cost of an investment equals the present value of the return on the investment. The DWR calculation gets its name from the way its return number will be more influenced by periods when the portfolio’s dollar-value is larger. The above example is “dollar-weighted” because the performance in the second year, when two shares are owned, has a greater influence on the overall return than the first-year when only one

share was held. Because it is so influenced by cash flows, a DWR can be positive only because money

was added; or it could be negative due only to withdrawals from the account.

Since the manager cannot control cash flows and the total dollars invested in the portfolio it is seen as inappropriate to use a measure like DWR that skews returns based on dollar amount size. TWR will generally differ from DWR, and the difference can be positive or negative depending on the period returns and portfolio activity. This usually happens at an early stage of a portfolio’s management, when assets may flow into an account at various times, or any time there are numerous cash flows in and out of an account.

So in final summation, the two key elements to take away from this in regards to TWR are: that cash flows, which affect the dollar amount of an account, do not affect the TWR; and that, the TWR measures how the money was managed, not the overall dollar amount change.

The information contained herein is intended to assist you in evaluating different investment portfolio performance measures. The information in this article is for educational purposes only. The information does not constitute investment advice or an offer to invest or to provide management services and is subject to correction, completion, and amendment without notice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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