Up-Market Capture Ratio

It sounds like some horrible statistic you'd find in the logs of Belgian traders after coming back down the Congo in the 1890s. Measuring the number of hands amputated to gallons of rubber collected...or something.

Luckily, it's nothing so gruesome. The "up-market capture ratio" stat provides a way to judge the performance of a fund manager at times when the market moves higher.

Any investment manager will have a benchmark by which they judge their performance. A fund based on the general market might use the S&P 500. Or...something with a more specific mandate might use a particular sector index. Either way, the fund manager's goal is to outperform that benchmark index. If the S&P 500 is up 5%, then the fund manager wants to post gains of at least 5%...and the higher above 5% they can get, the better it looks for them.

The up-market capture ratio tracks this outperformance. It's calculated by taking the manager's returns and dividing them by the returns from the index. Then the result is multiplied by 100. That gives you the up-market capture ratio.

So...the S&P rises 5% and the fund manager posts a 7% return...(0.07/0.05)*100 = 140. The up-market capture ratio for that period of time is 140. Any number above 100 means the fund manager outperformed the market; that situation represents the minimum performance they want to maintain. The higher above 100, the better the outperformance shown by the manager. The 140 number indicates a performance that was 40% above the index.

Anything below 100, and...you might as well throw darts.