The "time-weighted cum equity" calculation method
In the designation of this calculation method, "kum" stands for "cumulative" and "EK" for "equity". The calculation differs from the "time-weighted" calculation method. See the differences in the following example.
Beispiel:
Acceptance: Cash contribution on 10.01.2021 in the amount of EUR 100,000.
Date | Assets |
|---|---|
01.01.2021 | 10.000 EUR |
10.01.2021 | 10.100 EUR (ex. Cash contribution) |
10.01.2021 | 110.100 EUR (cum. Cash contribution) |
20.01.2021 | 110.200 EUR |
Calculation of performance using the "time-weighted" method:
p1 = (10.100 - 10.000)/10.000 = 1%
P2 = (110.200 - 110.100)/110.100 = 0,0908...%
P = (1 +p1) * (1 +p2) - 1 = 1.0917...%
Calculation of performance using the "time-weighted cum equity" method:
P1 = (10.100 - 10.000)/110.000 = 0,0909...%
P2 = (110.200 - 110.100)/110.100 = 0,0908...%
P = (1 +p1) * (1 +p2) - 1 = 0.18179...%
Here, the growth within the period under review is not set in relation to the assets at the beginning of the period (ex equity), but to the assets at the beginning of the period plus the equity difference within the period. As in the example, the two methods can be significantly different for large equity movements (compared to the original assets).