How is the five year performance calculated?

w00519773

I am analysing a few funds like this one: https://markets.ft.com/data/funds/tearsheet/summary?s=GB00BYVGKV59:GBX.

I am using this formula to calculate percentage increases: https://www.skillsyouneed.com/num/percent-change.html i.e. ((New Number - Original Number) / Original Number) × 100.  The text in my first hyperlink says that £1,000 invested five years ago is now worth approximately £2,200.  Therefore a 120% increase:

((2200-1000)/1000)*100=120

Yet the performance currently says 17.33% over five years: https://markets.ft.com/data/funds/tearsheet/performance?s=GB00BYVGKV59:GBX.

Is this saying the performance averages at 17.33% over five years i.e. 86.65% overall (5*17.33)? 86.65 is closer to 120%.  I guess the difference could be due to when the snapshot was taken and also fees?

Have I understood this correctly?

P933alilli

I think compounding of returns will play a part. So if you say that each year the increase was 17.33%, the calculation would be 1000 x 1.1733^5 = 2223.54.  Nearer to the stated return but not exactly!

Albermarle

Performance figures are always quoted after fees are deducted.

Eyeful

I used the Trustnet chart tool for the fund mentioned this gives:-
https://www2.trustnet.com/Tools/Charting.aspx?typeCode=FG1XC,N-

I find that over 5 years the
(a) Cumulative Performance= 122.4%
(b) Annualized Performance= 17.3%

Looking at the Discrete Performance (each 12 month period), of the fund it has swung from -29.4% to +50.4%.

Remember that this is the accumulative version of the fund. So the retained dividend, is being reflected in this funds price.

Perhaps the Trustnet chart tool might be useful in analyzing your funds.

Eyeful

1. Cumulative Performance 122.4%
   5 year  Ave CP= 24.48%


2. The 5 year Discrete Performance= -29.4, 44.5, 50.5, 9.7,32.
    Sum of DP= 107%
    5 year Ave DP= 107/5= 21.4%

3. They have a larger data base of fund % changes, divided by the larger number of readings used,. That  is how I  think they get down to the figure of Annualized Performance= 17.3%

Linton

Eyeful said:

1. Cumulative Performance 122.4%
   5 year  Ave CP= 24.48%


2. The 5 year Discrete Performance= -29.4, 44.5, 50.5, 9.7,32.
    Sum of DP= 107%
    5 year Ave DP= 107/5= 21.4%

3. They have a larger data base of fund % changes, divided by the larger number of readings used,. That  is how I  think they get down to the figure of Annualized Performance= 17.3%

Doesnt look tright to me.  The average DP is
((1-0.294)(1+0.445)(1+0.505)(1+0.97)(1+0.32))^(1/5)=1.17327=17.3% return, the same as the overall figure.

The individual year returns are cumulative.  Taking an arithmetic average does not mean anything.

Prism

You don't need any of the discrete figures - just the start and end amounts

(End value/Initial value)^(1/years)-1

(2200/1000)^(1/5)-1 = 17.1%

Not sure about the discrepancy from 17.3% - probably because 2200 isn't exactly 2200

Eyeful

Thanks Linton & Prism.

Perhaps this may be of use & interest to w00519773
https://dqydj.com/cagr-calculator/