Performance Perspectives Blog

Total return vs. NAV return

by | Sep 17, 2009

Just got a question from a client that I think is worthy of posting.

First, is “total return” the “industry standard.” Before answering this, what IS “total return?” Total return simply means that the return includes income. It used to be fairly common practice to show income return, principal return, and total return. This is less common today. The GIPS(R) standards used to state that “total return, with income, is required,” which was essentially redundant, since total return automatically includes income…this wording has changed! (hurrah!)

Yes, I’d say that “total return” IS the “industry standard.”

Second, what about the NAV return? Is this a valid alternative? Well, the NAV return IS, first of all time-weighted and secondly includes income, since the NAV includes income, and therefore the NAV return is an equivalent approach.