Over the last few months, you may have heard reference to “CRM2,” a set of regulations meant to enhance transparency in the investment industry by mandating investment management firms, dealers and advisors to provide clear reporting to their clients related to fees and performance, among other topics.
We welcome the push for transparency across the industry, and Burgundy’s reporting already meets most of the CRM2 requirements. The new piece for you, as a Burgundy client, deals with an alternate method of calculating your portfolio’s performance. Burgundy has historically used a time-weighted rate of return to measure performance, which is a standard in the industry. This continues to be the most appropriate tool for assessing the performance of the investment manager itself, as well as for comparing performance across investment managers or relative to a benchmark. The regulation now requires that investment managers provide an additional return calculation for your portfolio’s performance, called the money-weighted rate of return.
To help explain the difference between these two calculations, and to give you an idea of what to expect going forward, we have put together the following video and written article. If you would like to learn more on the subject, please click the following links: