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. Market Neutral

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

    A statistical measure of change in an economy or a securities ...
  3. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
  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 >>
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. Professionals

    Are Alternative Mutual Funds, ETFs Right for You?

    Alternative mutual fund and ETFs are gaining popularity but are they a good idea for your regular Joe investor?
  6. Investing

    Is the Best Plan for Pot Investing 'Wait-and-see?'

    Legalized marijuana is an emerging industry and those interested in investing in it should proceed with caution.
  7. Investing

    Hedged ETFs That Help You Cushion Currency Impact

    If you’re an investor holding non-U.S. assets, the returns on your investments will be affected when you translate your investment from its local currency
  8. Investing

    Active Funds: Getting What You Are Paying For?

    Fund investing could have hidden costs that can potentially make a big impact on your final return, particularly over the long-term.
  9. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.
  10. Investing Basics

    This Investment Strategy Could Be Your key To Success

    Goal-based investing seems like an obvious tactic. But many investors have only a vague idea what their goals are, much less how to achieve them.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center