The cumulative return shows the fund’s equity change due to trading activity since the fund’s inception until the selected date.
Cumulative return is calculated as time-weighted rate of return which is often used to evaluate the returns of Portfolio Managers (PM).This approach eliminates the distorting effects on return rates created by deposits and withdrawals.
This data is updated every 20 minutes.
At first any balance operations such as deposits withdrawals and internal transfers are used to divide the entire period into sub-periods. The rate of return for each of these periods is then calculated and multiplied to find the final rate. The final rate is presented as a percentage.
In other words, whenever a PM makes a withdrawal or deposits, the return calculation is not influenced at all to prevent artificial results.
Cumulative return is constantly updated and compounds over time.
Here’s an example:
- The PM opens a fund and deposits USD 500
- The PM starts to trade and the fund's equity increases from USD 500 to USD 600 based on his trading activity.
- At this moment, the PM makes a USD 400 deposit. The fund’s equity is now USD 600 + USD 400 = USD 1 000.
- After this, the PM continues to trade and the fund's equity increases from USD 1 000 to USD 1 500 as a result of his trading.
- To calculate the return for this whole period we divide it into two sub-periods: from the beginning to deposit ( Sub-period 1) and from the deposit to the current moment (Sub-period 2).
- Now we calculate the return for each sub-period Sub-period 1 = (USD 600 - USD 500) / USD 500 = 0.2 or 20% Sub-period 2 = (USD 1 500 - USD 1 000) / USD 1 000 = 0.5 or 50%
- Cumulative return for the two sub-periods is calculated by multiplying each sub-period's return. Cumulative return = (1+20%)*(1+50%) - 1 = 80%
Cumulative return calculations are strictly made between balance operations (deposits, withdrawals, and internal transfers), of which there is no limit.
Cumulative return for a selected period
You can see the fund's equity change for any period by selecting two dates on the return chart.
Let’s say you would like to see the return from 12th June to 31st August for a fund that was created on 1st April.
- Fund`s equity at the start was USD 1 000.
- Fund’s equity on 12th June was USD 1 450 and the cumulative return displayed on the chart for this date is (USD 1 450 - USD 1 000) / USD 1 000 = 45%.
- Fund’s equity on 31st Aug was USD 1 850 and cumulative return displayed on the chart for this date is (USD 1 850 - USD 1 000) / USD 1 000 = 85%.
- Change in the fund's equity from 12th June to 31st August is (USD 1 850 - USD 1 450) / USD 1 450) = 27.6%. You can see this figure above the chart, denoted as Relative change.
Note that you can also see the absolute change of cumulative return for this period, which is the difference between 2 figures (cumulative return at the beginning of the period and cumulative return at the end of the period). In our example it is 85% - 45% = 40%.
Investment Return drift
When you invest in a fund, be aware that there could be a difference between the fund’s return (displayed in the chart) and the return of your investment.
What may cause a drift?
- Performance fee payouts cause changes in copy coefficient and reopening of orders with smaller volume.
- Portfolio managers’ withdrawals from funds does not lead to immediate copy coefficient increase (that is done to protect investors), it is done at the end of the billing period.
- In scenarios when a copy coefficient is recalculated, the maximum copy coefficient is set at 14.
- The time at which the investment was initiated can also affect the investment return (for example, if you started the investment when the fund had drawdown, then a relatively small increase of fund return will cause bigger return in your performance).
Performance drift can sometimes be an advantage or a disadvantage.