Performance Measurement & Benchmarks

The TOTAL RETURN of a fund is the complete gain (or loss) an investor earns over a period, combining two components: the CAPITAL return (the rise or fall in the unit price / net asset value) and the INCOME return (distributions such as dividends or interest the fund pays out or reinvests).

Ignoring income understates performance. A fund whose price barely moves but which pays out a steady distribution can deliver a meaningful total return, so a headline price change alone is not the return.

Total return assumes distributions are REINVESTED (or at least credited to the investor). This is why an ACCUMULATION share class — which rolls income back into the fund — and a DISTRIBUTION (income) share class of the same fund can show very different price charts but a similar total return.

• •Capital return = change in unit price / NAV per unit over the period.
• •Income return = distributions received over the period.
• •Total return = capital return + income return, usually expressed as a percentage of the starting value.

For a single period, the total return as a percentage is: (end value − start value + income received) ÷ start value × 100.

Worked example: an investor buys units at $1.00. One year later the unit price is $1.06 and the fund has paid $0.02 per unit in distributions. Capital gain = $0.06; income = $0.02; total gain = $0.08. Total return = 0.08 ÷ 1.00 × 100 = 8%.

Had we quoted only the price move ($1.00 to $1.06), we would have reported 6% and understated the true total return of 8% by omitting the distribution.