Relative Return

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Market Neutral

    A strategy undertaken by an investor or an investment manager ...
  3. Index

    A statistical measure of change in an economy or a securities ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  5. Benchmark

    A standard against which the performance of a security, mutual ...
  6. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
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 >>
  2. What risks are associated with a closed end investment?

    A closed-end fund is an investment instrument that is listed on an exchange and trades much like common stock shares. Its ... Read Full Answer >>
  3. Can an investor use leveraged ETFs to invest in the airline sector?

    As of 2015, there are no leveraged exchange-traded funds (ETFs) available to track the airline industry within the transportation ... Read Full Answer >>
  4. What is the best managed fund for trading mid-cap stocks?

    Mid-cap stocks have a moderate capitalization and are officially valued between $1 billion and $8 billion. Actively managed ... Read Full Answer >>
  5. What is a good annual return for a mutual fund?

    A "good" annual return on a mutual fund can only be gauged in a relative sense, influenced primarily by the investment goals ... Read Full Answer >>
  6. What's the difference between a collateralized mortgage obligation (CMO) and a mortgage-backed ...

    A mortgage-backed security, or MBS, and a collateralized mortgage obligation, or CMO, are different types of asset-backed ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The Hidden Differences Between Index Funds

    These funds don't all match index returns. Find out how to avoid costly surprises.
  2. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always What They Appear

    Survivorship bias erases substandard performers, distorting overall mutual fund returns.
  3. Retirement

    Find Happiness By Altering Life Benchmarks

    It's not fair to compare yourself to the Joneses. Find out how to alter your aspirations and still meet your goals.
  4. Options & Futures

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  5. Investing Basics

    Calculating Funds from Operations

    Funds from operations (FFO) measures the performance of a real estate investment trust (REIT) and other similar types of investments.
  6. Investing

    These Investments Have Soared in 2015

    These five investments are on fire and still offer high potential going forward. Here's why.
  7. Professionals

    Due Diligence Tips for Investing in Alternatives

    Alternative investments can provide unique benefits to clients for whom they are suitable. But do your due diligence and beware of the risks.
  8. Professionals

    Target Date Funds: More Popular, Cheaper Than Ever

    How target date funds can help investors weather volatility when it comes to saving for retirement.
  9. Forex

    Best Ways To Protect Your Bitcoins

    Just like any other valuable asset, its important to keep your bitcoins safe. Here are few ways to protect bitcoins from threats like computer failures, loss of passwords, and hackers.
  10. Mutual Funds & ETFs

    Top Bachelor Degree For A Hedgefund Career

    From economics to statistic analysis, certain bachelor's degrees make graduates more qualified for landing highly sought hedge fund jobs.

You May Also Like

Hot Definitions
  1. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  2. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  3. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  4. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  5. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
Trading Center