Error in Annualized IRR for Members?
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Error in Annualized IRR for Members? Our new club (since May) is up roughly 5.5% and the unit valuation is up to 10.55 or so. The AIRR on the investment performance is 21.8% excluding cash, which makes sense since our first investments began May 31. However, the member performance report has AIRR listed for the individual members at the 5.5% range. I believe this is reporting IRR to date, not ANNUALIZED IRR. Am I missing something?
Paul, Is it possible that your new club has sold some stocks during its existence? That would account for the disparity in the numbers. The AIRR on Investments includes only active investments, not securities which have been sold, while the AIRR for members would reflect the history of all investments during the period being measured, including losers which have been sold. The AIRR for members is an anualized figure. Rip West Saint Paul, MN We started with cash and have put in new cash every quarter. We have added standard stocks on a monthly basis, but sold nothing. We have had a few dividend distributions,etc., but no membership withdrawals. It is all handled by the accountsync. The individual stocks (roughly equal allocation) have AIRR of 69%, 47%, 44%, 33%, 27%, -9%, -18%, -33% = 21.8% The performance benchmark lists an IRR of 5.7% (vs. the 500 index of 12.7%). This makes sense as an IRR "to date." The actuals are about a 3.65% gain in total, but this represents purchases over time. The individual member AIRR is listed as 5.3 - 6.2% with an average of 5.7%. It is an IRR to date, not an AIRR. Why? Rip West wrote: > Paul, > > Is it possible > that your new club has sold some stocks during its existence? That would account > for the disparity in the numbers. > Rip West > Saint Paul, MN Paul,
If you want to give me access to your bivio club as a
guest, I will take a look at it. I just checked some old bivio data files, and
the Airr for members is anualized. Alternatively, you could click on the
'detail' on the member performance report for one of your members and post the
detail here. Then we could verify the irr calculation by inserting it in an xirr
function of an excel spread sheet.
Rip West
Saint Paul, MN Ok, did some investigation and figured it out. The IRR numbers are annualized in all cases. I checked with Excel IRR. The issue is the cash account. We started with a bunch of cash for a while, and took our time investing so that we had a lot of cash at any point (and still have about 25% in cash now. Our cash earns next to nothing in a brokerage account. So, our member IRR is 5.6% all told. However, our investments have done much better than the cash. If you take JUST the investment transactions (purchases and dividends) and do an XIRR it is 21% As we move forward and have many more dollars in investments than cash, the cash component will be much less of an influence on IRR. Mystery solved. Hopefully this will make sense to others who might have the same issue. Rip West wrote: Then we could verify the irr calculation by inserting it in an xirr > function of an excel spread sheet. > > Rip West > Saint Paul, MN > |
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