Performance and reporting guides

How portfolio returns are actually calculated

Most explanations of investment performance either stop at the definition or disappear into notation. These guides do neither. Each one gives you the formula, a worked example with every number shown, a calculator or decision tool you can run against your own situation, and an honest account of where the method breaks down.

Written for registered investment advisers, family offices, and the operations people who have to produce these numbers and then defend them in a client meeting.

Start here: return calculation

Three methods, three different answers on the same portfolio. Knowing which one to show, and when, is most of the job.

Guide Time-weighted return The standard for judging a manager, because client contributions and withdrawals never touch the result. Formula, worked example, and a calculator that links your sub-periods. Guide The Modified Dietz method What to use when you do not have a valuation on every cash flow date. Includes the day-weighting convention that trips up implementers, and what GIPS actually requires. Guide Money-weighted return The IRR of a portfolio, and the right number when the manager controls the timing. Worked example, calculator, and the four things that quietly break an IRR. Decision guide TWR vs IRR: which do you show? Four questions that pick the method for you, a case where the two answers differ by 128 basis points on the same portfolio, and what GIPS and the SEC require.

Compliance and reporting

What the SEC Marketing Rule and the GIPS standards require of the numbers you put in front of clients.

Guide The SEC Marketing Rule Rule 206(4)-1 in plain English: what counts as an advertisement, gross and net at equal prominence, prescribed time periods, hypothetical performance, and the 2025 and 2026 FAQ changes. Guide GIPS compliance for small firms What claiming compliance actually involves, from firm definition through verification, a readiness check, and an honest answer on whether a private-client firm needs it.

Which return should you be showing?

Run the same account through all three methods and you get three different numbers. That is not an error. They answer different questions.

Method	Answers	Use it when	Needs
Time-weighted	How did the portfolio perform?	Judging a discretionary manager, comparing to a benchmark, composite reporting	A valuation at every external cash flow
Money-weighted (IRR)	How did the client’s money perform?	The manager controls the timing of capital calls and distributions, as in private equity, real estate, and drawdown funds	Dated cash flows, no interim valuations required
Modified Dietz	Estimate of time-weighted return	No flow-date valuation available and the flows are small relative to the portfolio	Cash flow dates and amounts only

The single most common mistake is showing a client a money-weighted return next to a benchmark. An index has no cash flows, so the comparison is not like for like, and it will flatter or damage you at random depending on when the client happened to move money. Work through the choice here.

Advantage Portfolio Hub calculates Modified Dietz returns for you, across every entity, account, and holding, chained monthly for a since-inception figure, and rolls them into a firm-branded PDF report. Alternatives, trusts, and LLCs included, not bolted on. Start a free trial

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Educational content. Advantage Portfolio Hub is a software provider, not an investment adviser, accountant, or law firm. Nothing on these pages is investment, tax, accounting, or compliance advice. Calculation methods and regulatory requirements change; confirm anything you intend to rely on with your verifier or compliance counsel.