- 31 dec.Vector 2021 Annual Review
- 15 okt.Q3 Review
- 17 aug.Chinese crackdowns
- 22 jul.Vector 2021 Semi-Annual Review
- 25 jun.Why we still like value
- 25 mei'Transitory' Inflation
- 22 apr.Reversal to the mean?
- 17 mrt.Vector's take on sustainable finance
- 09 mrt.Sustainability-related disclosures in the financial services sector (SFDR)
- 19 feb.David versus Goliath: An analysis of 2020 stock market performance
- 30 dec.Vector 2020 Annual Review
- 20 nov.Factor momentum
- 20 okt.How will the US elections influence your portfolio?
- 25 sep.Are better times for quant investing on the horizon?
- 26 aug.Fama/French going through its biggest drawdown since 1963
- 17 jul.Vector 2020 Semi-Annual Review
- 25 jun.A Look At Post-Corona Market Valuations
- 25 meiUnprecedented times call for unprecedented measures...
- 23 apr.Vector's outlook on the Corona Crisis
- 13 mrt.Market correction: sense or sentiment?
- 17 feb.The market and sector concentration
- 14 jan.Notice to shareholders
- 31 dec.Vector 2019 Annual Review
- 17 dec.Fama/French going through its second biggest drawdown since 1963
- 15 nov.The Alpha Lifecycle
- 16 okt.Vector 2019 Q3 Review
- 10 sep.A new prospectus
- 14 aug.Market Review: July
- 10 jul.Vector 2019 Semi-annual Review
- 14 jun.Are factor premia disappearing?
- 21 meiHow persistent is regional outperformance?
- 12 apr.Market recovery: sense or sentiment?
- 12 mrt.Markets solidify recovery
- 12 feb.Stock Markets Rebound
- 31 dec.Vector 2018 Annual Review
- 14 dec.2019 (outrageous) predictions!
- 20 aug.Temperatures and stock markets heat up
- 18 jul.Vector 2018 Semi-annual Review
- 14 jun.Do exporters suffer during trade wars?
- 15 meiStrong earnings put markets on the road to recovery
- 17 apr.Q1 Overview
- 13 mrt.Stock Markets: Episode VI: The return of volatility
- 02 mrt.Vector wins Morningstar Germany and Belgium Awards!
- 22 feb.Vector Flexible wins De Tijd/L'Echo Awards for the third year in a row!
- 16 feb.Navigator wins Morningstar France Award!
A short introduction on the up- and down-capture ratio
13 mei 2015
Some metrics can help shareholders determine how a fund, historically, has fared in periods of market strength and weakness. The upside and downside capture ratio is such a metric. Upside (downside) capture ratios for funds are calculated by taking the fund’s monthly return during months when the benchmark had a positive (negative) return and dividing it by the benchmark return during that same month.
When an investor expects markets to fall, he should probably bias his selection toward funds with a low down-capture ratio. Following this approach – and assuming that the funds’ investment style does not change over time - his investment should drop less severely during the downturn, while he should still be able to reap some upside in case of an (in this case unexpected) upturn.
When an investor thinks the stock market will rise, he should probably be on the lookout for a fund that has a high up-capture ratio – as these funds should be well positioned to reap the full benefits of bull markets.
We calculated both metrics for both Vector funds (Navigator and Flexible), and for an average of 2000 global Equity funds. The benchmark we used is the MSCI ACWI NR in Euro (which has an up- and down-side capture ratio of 100%, by definition). We calculated the up and down capture ratio over the last 3 years, using monthly returns:
|Down Capture Ratio|
|MSCI ACWI (NR, Euro)||100||100|
|Average of 2000 Global Equity Funds||92||95|
The average global equity fund(*) only captures 92% of returns when markets are rising, and misses out on the remaining 8% of 'good' returns. Unfortunately, when markets fall, the average fund tends to capture a larger share (95%) of the bad returns. Consequently, the average (global) equity fund has underperformed the market over the last 3 years.
Vector Navigator has a 3 year up-capture ratio of 120% and a downside capture ratio of 78%, showing that the fund combines the best of two worlds: high upwards potential and (relatively) low downside risk.
Over the same 3 year horizon, Vector Flexible’s downward capture ratio is as low as 55%, while its upward capture ratio is still 84%. Both funds clearly do what they’re designed to do: have a better performance than most comparable funds during bear markets – without giving it all back in bull markets.
(*) Morningstar Category: Large-Cap Blend Global Equity