Combining Portfolio Returns Across Different Valuation Frequencies

Summary

The document presents a portfolio measurement problem involving two funds with different valuation schedules and cash-flow rules. One fund is valued monthly, allows cash flows only at month-end, and can use time-weighted returns. The other is valued quarterly, permits daily cash flows, and may use Modified Dietz or a similar approach. The author asks how to calculate a quarterly return for the combined portfolio and whether monthly returns can also be produced.

No answer or calculation method is included, so the document does not establish whether market-value weighting the component returns is valid or whether the portfolio should instead be treated as one asset under a cash-flow-aware method. The central challenge is aligning return periods and valuation data when component methodologies differ. It is a useful framing of a performance-measurement question, but leaves the required assumptions and solution unresolved.

Key ideas

• The portfolio combines funds with different valuation frequencies and cash-flow schedules.
• The monthly valued fund uses a time-weighted return approach in the example.
• The quarterly valued fund allows daily cash flows and may use Modified Dietz.
• The document raises, but does not answer, whether component returns can be weighted or the portfolio needs a unified calculation.
• Monthly portfolio returns are difficult to determine when one holding is valued only quarterly.

Tags

# How to calculate portfolio returns from assets with different valuation frequencies and return methdologies?


# How to calculate portfolio returns from assets with different valuation frequencies and return methdologies?












I have a situation in which I'd like to calculate a total portfolio return for a portfolio made up of funds with different valuation frequencies and return methodologies.

As an example, say I have a portfolio that owns shares in two funds. The first fund is valued monthly with cash flows restricted to month-end. Returns for this fund can be calculated using a time-weighted approach. The second fund is valued quarterly with cash flows allowed on a daily basis. Returns for the second fund can be calculated using Modified Dietz or similar. There are a couple questions I have:

- How would I properly calculate a quarterly return in this example? Can I just market value weight the two individual fund quarterly returns? Should I use a Modified Dietz approach, treating the full portfolio as a single asset?

- If I wanted to calculate monthly returns for this portfolio, is there an appropriate way to do that?

Thanks in advance!

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.