Rate of Return

A Calculation to Consider

September 2015

“How did we do?” It’s one of the first questions most asset owners ask.

Time-weighted rate of return (TWRR) has long been the industry’s default calculation to discount cash flows. Regulatory forces, the simplicity of the calculations and stakeholder pressures may be why. But it’s only looking at part of the story.

What if we took a more holistic approach to understand the drivers of investment performance?

A money-weighted rate of return (MWRR) can complement TWRR by providing a bigger-picture view and accounting for post-crisis reporting complexities. By understanding the practical application and benefits of MWRR, practitioners can apply them to help answer their most important questions about performance.