Return measurement
Money-Weighted Return (MWR)
Portfolio return reflecting the size and timing of external cash flows.
What Money-Weighted Return Means
Money-weighted return is the IRR on contributions, withdrawals, and ending value. Large cash flows receive more influence, so it describes the investor's experienced return.
Money-Weighted Return Formula
MWR = IRR or XIRR that sets all cash-flow NPV to zero
How to Read the Result
A large contribution immediately before a fall can make MWR lower than TWR because more investor capital experienced the decline.
Limitations
- Investor timing can dominate the result.
- Irregular dates require XIRR-style solving.
- Multiple sign changes can create ambiguity.
Common Questions
Is MWR the same as IRR?
In portfolio reporting, money-weighted return is calculated as an IRR over portfolio cash flows.