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The majority of information provided by the reports is self explanatory. However clarification is needed to explain the return formulas in the performance valuation report.
Net Return Over Period
The net return over the period in it's simply form is calculated by:
(Current Value – Adjusted Start Value + Cash Distributions) / Adjusted Start Value
The 'Adjusted Start Value' represents the starting value adjusted for any withdrawals or incremental investments made during the period. Because the current value is influenced by the timing of these transactions, we account for the timing in the adjusted start value. Suppose, for example, a large part of the investment was liquidated soon after the start date but long before the valuation date. The start value is therefore 'artificially' inflated for the valuation period because the current valuation is based on a smaller amount of capital invested than indicated by the start value. In this case, the net return would be understated by assuming that more capital was investment for the full period than was actually the case. The solution is to adjust the start value by taking into account the magnitude and timing of investment and divestment transactions during the reporting period.
The adjusted start value is calculated via the following formula.
Start Value + (total incremental investments X (Weighted Avg. No. days from Value date / Total No. days in period))
This calculation is also known as 'Money Weighted' or 'Dollar Weighted' Return.
Annual Return Since Inception
This formula annualizes the return since inception via the following formula.
(Prior return since inception + Net Return over current period) X (365 / (Value date - Original investment date))
This is the average annual performance since the original investment was made.
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