Wikipedia talk:Articles for deletion/Modified Dietz method

Under fees, you state:

<< To measure returns net of fees, allow the value of the portfolio to be reduced by the amount of the fees. To calculate returns gross of fees, compensate for them by treating them as an external flow, and exclude accrued fees from valuations.>>

Regarding the last phrase, perhaps I am misreading, but you seem to suggest that the beginning and ending NAVs should each be reduced to the extent that there has been net accrued incentive fees since inception. Are you referring to the amount of carried interest that would be paid to the manager if the portfolio were liquidated at the beginning, or ending, of the period? If so, I believe this is incorrect. Recall that the sole purpose of a TWR is to compare the performance of managers (who are presumed to not control cash flows). TWR is often called the "manager's rate of return" rather than the investor's rate of return. So, you are trying to figure out how well the manager managed the investment - in a way that allows one to compare the manager to another manager who managed a different investment, both with different cash flow experiences. You are not trying to figure out how the investor's wealth grew. For that reason, your MD denominators should reflect the full value of the investment at the beginning of the period that is at work producing the total income (including realized and unrealized gain) in that period. Please address. WikiDeanAlt