Downside Capture Ratio

The Downside Capture Ratio shows the fund’s performance in a down market relative to the benchmark. FE Analytics allows the user to specify any fund, sector, index or portfolio as the desired benchmark.

A Downside Capture Ratio that is less than 100% demonstrates that when the market went down the fund caught only a fraction of the losses, and the lower the down capture the better. In rare cases it is possible to see a negative Downside Capture Ratio, which indicates that when the markets are down, the fund is up.

E.g. If a fund has a Downside Capture Ratio of 85% this tells us that the fund captured only 85% of the benchmark’s negative performance during a down market.

The ratio is calculated by taking the funds downside capture returns and dividing it by the benchmarks downside capture returns over the same time period.

The Fund downside capture return is calculated by taking the fund’s return during a specified period where the benchmark’s return is less than 1 and then compounding the fund’s returns by multiplying them together. 1 is subtracted from the result in order to convert the ratio into a percentage.

The Benchmark downside capture returns is calculated in the same way as the Fund downside capture return, however it uses the benchmark’s returns during the same time period instead.

Note: The Downside Capture Ratio is more useful (but not limited) over longer periods of time.