Relative Return

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DEFINITION of 'Relative Return'

The return that an asset achieves over a period of time compared to a benchmark. The relative return is the difference between the absolute return achieved by the asset and the return achieved by the benchmark.

BREAKING DOWN 'Relative Return'

Relative returns are most often used when reviewing the performance of a mutual fund manager. Because holders of mutual funds are charged management fees, they expect a manager to achieve returns higher than the benchmark index. For example, if the fund you are holding achieves an absolute return of 12% over the past year while the benchmark index provides a return of 15%, then the fund has achieved a relative return of -3% for the year.

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RELATED FAQS
  1. What's the difference between absolute and relative return?

    Knowing whether a fund manager or broker is doing a good job can be a challenge for some investors. It's difficult to define ... Read Full Answer >>
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    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
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