The excess return drawdown is the difference between the highest cumulative excess return the manager has yet achieved, and it's current cumulative excess return any point in time.
Der(t) = ECmax - EC(t)
Where Der(t) is the excess drawdown at time t, ECmax is the maximum cumultaive excess return between the manager and benchmark at any time t' < t, and EC(t) is the cumulative excess return between the manager and bechmark at time t.
The excess return drawdown is intended to give you a sense of the regret you'd experience owning a manager instead of the beachmark. So it can be zero even in terrible markets if the manager is performing less bad than the benchmark. Conversely, even in extreme bull markets a manager could have a large excess return drawdown if it is underperforming the benchmark.
Informa Investment Solutions is part of the Business Intelligence Division of Informa PLC
This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.