Return % (XIRR) Formula
How AssetView calculates time-weighted returns using XIRR (Extended Internal Rate of Return) for accurate performance measurement.
AssetView's Return % uses XIRR, a time-based, cashflow-based calculation of extended internal rate of return, to measure performance and compare returns across disparate accounts, assets, and asset classes. XIRR stands for extended internal rate of return. AssetView refers to the XIRR calculation as a vXIRR (virtual XIRR) in cases where a reasoned assumption is made for the liquidation value of an asset with open positions (e.g. the liquidation share price is set at the share price of the most recently booked transaction on the asset).
XIRR Formula
XIRR = IRR such that: Σ (CF_t / (1 + r)^((t - T0) / 365)) = 0
Where:
| Variable | Definition |
|---|---|
| CF_t | The cash flow at time t |
| t | The date of the cash flow |
| T0 | The base date (typically the first cash flow date) |
| r | The internal rate of return (what we solve for) |
| Σ | Summation across all cash flows |
| 365 | Adjusts for the number of days in a year for the actual time-based discounting |
The equation solves for r (rate of return) where the net present value (NPV) of all cash flows equals zero.
Example:
The following series of cashflows would result in an XIRR of 3.69%.
Date Transaction
------ -----------
6/1/23 -$97,250
6/1/23 -$1,458
7/1/23 $1,750
1/1/24 $1,750
11/17/24 $97,250
3/28/24 $3,121