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Beginner
Total Return represents the percent return for an individual security or portfolio for a stated time period. For portfolio performance measurement it is a starting point for analyzing returns attributed to active management.
Synonym: absolute return
Mathematically, total return is the sum of the benchmark return and the active return. With two inputs you can easily solve for the third.
For context, when active portfolio managers compete with benchmarks, it's common to refer to all three components quickly and interchangeably. Portfolio managers are motivated by, and hope to achieve, slight and consistent 1% to 2% wins against their benchmark monthly to offset periods when they fall behind. Every portfolio manager knows the status of these metrics, which illustrates their importance.
Kay: Quickly, if the fund's total return and active
return were the same, what was the benchmark return?
Ann: The benchmark was flat.
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