Hi, below a standard overview of a portfolio.
TWR p/a for the total portfolio is lower than equivalent metric for the Core or Satellite …
What am I missing ?
A good desciption…
One “issue” is that the total (here “Som”) is including taxes and fees (and therefore the performance is lower) while the performance of categories was traditionally calculated without taxes and fees (and therefore the performance is higher). I realised that only lately - might need a new filter here.
Apart from this, yes, the total can also be lower than what is shown for the individual categories. Why? Over time the categories can have different weights. If a category had a very high performance when being only a small part of the portfolio but a low performance when later being a large part of the portfolio, the category itself has a high value, but the contribution to the “sum” is much lower.
Thank you, clear answer.
It would be logical that performance of a subset would be calculated in the same way than the overall portfolio to prevent this skew. Your remark on the different weights over time does make sense. Hadn’t thought of that in this way.