Glossary

Time-Weighted Return (TWR)

Also known as: Geometric Return, TWR

A performance measure that isolates the return generated by an investment manager by removing the effect of the timing and size of external cash flows, calculated by geometrically linking the returns of sub-periods bounded by each contribution or distribution.

TWR is the standard for evaluating manager skill because it is unaffected by decisions outside the manager's control — how much an investor contributes and when — making it the appropriate metric for open-end, evergreen funds where investors independently choose their own subscription and redemption timing. It is a less complete measure for closed-end, drawdown-style funds, where the manager itself controls capital call and distribution timing as an integral part of the value-creation strategy (calling capital quickly to capture favorable pricing, or delaying distributions to reinvest), which is why closed-end fund performance is reported primarily using money-weighted measures, with TWR shown as a supplemental figure at most. Reporting standards bodies for investment performance generally require TWR (or an approved money-weighted alternative for vehicles where cash flow timing is manager-controlled) as the basis for composite performance disclosure.