Down-Market Capture Ratio Defined

The down-market capture ratio is a statistical measure of an investment manager's overall performance in down-markets. The ratio is calculated by dividing the manager's returns by the returns of the index during the down-market and multiplying that factor by 100. Down-Market Capture Ratio   \=   MRDM Index Returns × 1 0 0 where: \\begin{aligned}&\\text{Down-Market Capture Ratio}\\ =\\ \\frac{\\text{MRDM}}{\\text{Index Returns}} \\times 100\\\\ &\\textbf{where:}\\\\&\\text{MRDM}=\\text{manager's returns in down market}\\end{aligned} Down-Market Capture Ratio \= Index ReturnsMRDM×100where: Up-Market Capture Ratio Down-Market Capture Ratio   −   Market Capture Ratio \\begin{aligned}&\\frac{\\text{Up-Market Capture Ratio}}{\\text{Down-Market Capture Ratio}}\\ - \\ \\text{Market Capture Ratio}\\\\&\\qquad= \\ \\frac{\\text{Manager's Returns}}{\\text{Index Returns}}\\ \\times\\ 100\\end{aligned} Down-Market Capture RatioUp-Market Capture Ratio − Market Capture Ratio An investment manager who has a down-market ratio of less than 100 has outperformed the index during the down-market. Once the up-market capture ratio is known, you can compare it with the down-market ratio, and it may reveal that a manager with a large down-market ratio still outperforms the market. For example, if the down-market ratio is 110, but the up-market ratio is 140, then the manager has been able to compensate for the poor down-market performance with strong up-market performance. If the up-market ratio is only 90, but the down-market ratio is 70, then the overall capture ratio is 1.29, indicating that the manager is outperforming the market overall.