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Value the portfolio around the transfer
In a fictional account, 100 grows to 110 immediately before an owner deposits 90. The post-deposit base is 200. That base then grows to 180. The first subperiod return is 10%; the second is −10%. The deposit itself is not performance.
Multiply the subperiod growth factors
The linked result is 1.10×0.90−1 = −1%. An arithmetic sum of the returns would give zero. Each return acts on the capital present during its own interval. External-flow sizes are removed from the linked rate by forming the subperiod boundaries correctly.
| Stage | Value | Role |
|---|---|---|
| Start | 100 | First base |
| Before deposit | 110 | First endpoint |
| After 90 deposit | 200 | Second base |
| Final | 180 | Second endpoint |
Identify missing valuations
Exact linking in this illustration uses a valuation immediately before and after the deposit. If those values are unavailable, a selected approximation may be needed. Do not present an endpoint adjustment as exact time weighting without stating the valuation assumptions.
Keep the investor experience separate
A time-weighted measure describes linked portfolio performance. The owner’s capital-timing experience is a different question addressed by a money-weighted measure. Neither number alone identifies why a security or manager produced its result.