Down Capture Ratio

The down capture ratio is a measure of a manager’s sensitivity to an index when the index has negative returns. It is calculated by dividing the manager’s annualized performance return for the intervals of time during the measurement period when the index was negative by the index’s negative returns over the same intervals.

For example, if the S&P 500 was down 100 basis points and a manager was down 35 basis points over the exact same period of time, the down capture ratio would equal 35%. A down capture ratio that is greater than 100% indicates a manager lost more than the index when the index had negative returns.

Likewise, a down capture ratio that is less than 100% indicates a manager lost less than the index when the index had negative returns. Lastly, a down capture ratio that is negative indicates a manager had positive returns when the index had negative returns.

Since the down capture ratio measures how much of the negative index returns a manager captured, the less it is the better. However, the down capture ratio (and all risk measures) should be evaluated in conjunction with other investment metrics to best assess the manager’s performance and risk profile.

Down Capture Ratio
Down Capture Ratio