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BLOGS. October 16, 2019

Internal Rate of Return vs. Time Weighted Returns

In a recently published whitepaper, SS&C provided insight into the increased popularity of open-end funds. There may be nuances asset managers are not familiar with given their closed-end fund focus—especially their comfort with the prevailing performance measurement tool, Time Weighted Returns (TWRs). This blog explores the differences between TWR and Internal Rate of Return (IRR) and some of those particular nuances with TWR’s this author has personally experienced during his nearly 20-year career working with open-end funds. Much of the technical language was sourced from the NCREIF PREA Reporting Standards Manual. NCREIF and PREA encourage the distribution of these standards among all professionals interested in institutional real estate investments. Copies are available for download at www.reportingstandards.info.