Portfolio returns
Last updated
Last updated
Understanding the calculation of the returns of an individual investment or for an investor's whole portfolio is essential. In our platform we offer 2 types of investment products: (i) investing in a specific deal tranche, (ii) investing in a pool. Each of those has a different logic to calculate its returns.
Fundamentally, the main difference between the 2 is that the deal tranches do not reinvest interest, making it available for withdrawal upon repayment. For pools, repayments can be (i) re-invested in new deals or (ii) withdrawn by investors; resulting in compounding behavior.
While pools and deals behave differently with regard to how they handle interest received, their returns are basically calculated the same way:
(Interest repayment amount) / (Exposure right before the repayment)
As an example, if an investor has 1000 USD in a certain Investment A, and they receive a 10 USD interest repayment:
Return = 10/1000 = 1%
In the platform, we show returns per month. If multiple repayments happen within one month for an investment, we add them up to get to the final number.
Head to the “Your Portfolio” page, “Individual return” tab and you'll be able to see this calculation for each of the specific positions of your portfolio
On the right-end of the table, you'll notice the “Year” and “Total” columns. Those represent the sum of the returns within the year (e.g. in all months of 2023) and the sum of all-time returns
The concept of Contribution means how much a specific investment is contributing to the overall portfolio return. It is calculated by simply weighting the investment return:
(Weight of Investment A) = (Exposure Investment A)/(Total Portfolio Exposure)
(Contribution Investment A) = (Weight of Investment A) * (Return of Investment A)
Following up on the previous example, let's say the investor has another position of 1000 USD which we'll call investment B. This is how we would calculate the contribution of Investment A:
(Weight of Investment A) = (1000/2000) = 50%
(Contribution Investment A) = 50% * 1% = 0.5%
This is the information you see in the “Portfolio return” tab represented as each of the colours in the chart, and in the non-bold font in the table. For the total portfolio return (in bold), check step 3 below
To calculate the total portfolio return, we should simply sum all the contributions its investments.
(Portfolio Return) = sum (Contributions)
In our example, let's say investment B yielded 2%. Then:
Contribution Investment A = 0.5%
Contribution Investment B = 50% * 2% = 1%
Portfolio return = 0.5% + 1% = 1.5%
The portfolio return percentage means the factor in which your whole portfolio has grown, one of the most important metrics when it comes to monitoring. You can quickly check this information in the "Portfolio return” tab, through the stacked area chart, or the bold line in the table. Plus, the contributions of each investment are also represented as colors in the chart and non-bold lines in the table.
On the right-end of the table, you'll notice the “Year” and “Total” columns. Those represent the sum of the contributions and portfolio returns within the year (e.g. in all months of 2023) and the all-time sum (e.g. the sum of all years for that investor’s portfolio).
