This module is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 3 of 10 · 12 min
Which return to report: managers, investors and GIPS
Report the time-weighted return when the manager cannot control client cash flows and the money-weighted return when the manager does control them (or when the investor wants their own result), and always build the cash flows from the investor's side.
In short
- Investors control contributions and withdrawals; the manager controls asset allocation, security selection, realising gains and whether to reinvest or distribute income.
- Only cash crossing between investor and fund is an external cash flow. Dividends and realised gains that the manager reinvests net to zero.
- The GIPS standards require the TWR unless the manager controls external cash flows and the fund is closed-end, fixed-life, has committed capital or holds significant illiquid assets; then an MWR is allowed.
- Public-market managers: TWR. Private equity managers who call committed capital: MWR. Investors judging their own result: MWR.
- TWRs are usually built from daily returns linked together; compounding a daily rate over 365 or 252 days gives different annual figures.
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