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What a performance report contains
- Time-weighted return for the period and standard time periods (1Y, 3Y, 5Y, since-inception).
- Benchmark comparisons appropriate to the strategy.
- Contributions and withdrawals over the period.
- Fee impact — gross of fees, net of fees, or both clearly labeled.
- Asset allocation snapshot at the report date.
- Top holdings or significant positions, where appropriate.
Common performance-reporting pitfalls
- Inconsistent treatment of cash flows — money-weighted vs. time-weighted returns confused in client communication.
- Benchmarks that flatter the portfolio rather than fairly compare it.
- Net-of-fees vs. gross-of-fees confusion — clients see big numbers, advisor reports may net them down.
- Inception-to-date returns biased by good or bad starting periods.
Marketing Rule and performance
When performance is presented to current or prospective clients in a way that is communicated more broadly than a single account, Marketing Rule requirements apply:
- Net of fees as the prominent number when net is shown.
- Specific time periods (1Y, 5Y, 10Y) when any time period is shown.
- Clear labeling of gross vs. net, model vs. actual, hypothetical vs. live.
- Hypothetical performance restricted to specific intended audiences with disclosures.
Custodian vs. firm performance
Custodian-provided performance reports are accurate at the position level but may not match the client's intended portfolio if accounts span multiple custodians or include positions outside the custody footprint. Firm-level performance reporting fills the gap but inherits responsibility for accuracy under the Marketing Rule.
How StratiFi thinks about performance reporting
Performance is what the client believes they paid for. The firms that hold up under examination — and that build durable client trust — are the ones who report performance fairly, with consistent benchmarks, clear gross/net labeling, and the same numbers in client communication that the firm uses internally. Inconsistencies between internal and external numbers are reliably found.
Frequently asked questions
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How often should performance be reported?
Quarterly is the most common cadence for retail advisory clients, with annual long-form reviews. Some firms provide monthly summaries; the IPS or advisory agreement should specify. -
What's the difference between time-weighted and money-weighted return?
Time-weighted return measures the strategy's performance independent of cash flows — useful for evaluating the manager. Money-weighted return reflects the client's actual experience including the timing of contributions and withdrawals. -
Are advisers required to follow GIPS?
No — GIPS is voluntary. Many institutional managers claim GIPS compliance to satisfy institutional client requirements; retail-only advisers typically don't claim GIPS but follow the Marketing Rule.