Time-Weighted Return (TWR)

Time-weighted return (TWR) measures investment performance while removing the effect of client deposits and withdrawals. It breaks the period into sub-periods around each cash flow and links their returns together, so the result reflects how the investments performed, not when the client added money.

Advisors rely on TWR to judge their own management and to compare a portfolio fairly against a benchmark or peer manager. Because clients — not the advisor — control the timing of contributions, TWR isolates the part of the outcome the advisor actually influences.

This makes TWR the standard for manager and composite reporting inside portfolio management software, and it underpins performance shown to clients and prospects.

It helps to contrast TWR with its counterpart:

• TWR — strips out cash-flow timing; best for judging the manager
• Money-weighted return (IRR) — reflects cash-flow timing; best for the client's actual dollar experience
• Use both — one answers "how good is the manager," the other "how did my money do"

Accurate TWR requires clean transaction data and consistent daily valuation.