Time-weighted Returns
Time-weighted returns measure investment performance by eliminating the impact of cash flows. This metric is crucial in assessing the skill of fund managers, as it reflects the return generated by the manager’s investment decisions alone. Time-weighted returns are particularly useful for comparing performance across different funds with varying cash flow patterns.
Key Takeaways
- Measures performance independent of cash flows.
- Critical for assessing fund manager skill.
- Useful for comparing different funds.
- Important in VC and PE performance analysis.
