'What matters are rolling returns...': Edelweiss Mutual Fund's Radhika Gupta criticises point-to-point returns analysis
Radhika Gupta, MD of Edelweiss Mutual Fund, argues that point-to-point returns are misleading. She advocates for rolling returns as a more consistent measure of mutual fund performance.
- Apr 22, 2025,
- Updated Apr 22, 2025 1:45 PM IST
Radhika Gupta, Managing Director and CEO of Edelweiss Mutual Fund, has expressed concerns over the prevalent use of 'point-to-point return' as a metric for assessing mutual fund performance. She cautioned investors about relying on this method, emphasising its potential to distort a fund's historical performance. Gupta points out that many websites dedicated to mutual fund analytics rely heavily on discrete point-to-point returns.
However, she argued that this metric is "broken" because it can be overly influenced by one exceptional or poor year, thus skewing the overall assessment of the fund's history. This critique highlights a significant issue in how mutual funds are evaluated in the current market.
Gupta advocated for an alternative approach, suggesting that rolling returns offer a more reliable measure of a fund's consistency over time. Unlike point-to-point returns, which only consider a specific timeframe, rolling returns take into account the performance of a fund across various periods, thereby providing a more comprehensive picture.
She explained that rolling returns can better illustrate a fund's stability by showing the returns generated over different timeframes, such as three or five years, which can include investments made at different points in time. This method provides investors with insight into the fund's performance over a longer duration, rather than just a snapshot.
"Most websites that do MF analytics focus on discrete point to point returns. I have said time and again, this is a broken metric because one good year or bad year colours the entire history. What matters are Rolling Returns — they show how consistent a fund has been over time, not just at one point. They represent the experience a cohort of investors have had over 3Y or 5Y," Gupta wrote on X.
To illustrate the superiority of rolling returns, Gupta gave an example: if an investor examines a fund's five-year rolling returns from 2010 to 2020, it calculates the returns from each day or month within that decade for the subsequent five years. This approach offers a broader perspective on the fund's performance, revealing how it has fared over time rather than focusing on a single period. This method also levels out fluctuations caused by temporary market conditions, ultimately presenting a more accurate and dependable evaluation of a fund's performance.
In alignment with this philosophy, Edelweiss Mutual Fund has incorporated rolling return data into its fund pages. This addition aims to equip investors with better tools for evaluating mutual funds, allowing them to make more informed decisions based on the fund's reliability and consistency.
Gupta expressed hope that other mutual fund platforms will adopt similar practices, enabling investors to focus on long-term stability rather than short-term gains or losses. By prioritising rolling returns, Edelweiss Mutual Fund seeks to enhance the decision-making process for its investors, steering them away from potentially misleading metrics.
Understanding rolling returns
Understanding rolling returns is crucial for investors seeking a clearer, more consistent view of mutual fund performance over time. Unlike fixed-date returns, which show gains or losses from a single point (for example, April 1, 2015, to April 1, 2025), rolling returns measure returns generated over overlapping periods within a specific time frame. This helps investors assess how consistently a fund has performed, regardless of market timing.
For instance, suppose you’re evaluating a mutual fund's 3-year rolling returns over a 10-year period (2015–2025). Instead of just looking at returns from 2015 to 2018 or 2022 to 2025, you would calculate the 3-year return for every single day, week, or month starting in 2015 and ending in 2022. So, returns would be measured for 2015–2018, 2016–2019, 2017–2020, and so on.
This gives you multiple data points—instead of just one—to see how often the fund has delivered strong, average, or weak returns. If the fund consistently delivers strong 3-year rolling returns across most time periods, it’s a sign of stable and reliable performance, even across volatile markets.
Why it matters: Rolling returns smooth out short-term market fluctuations and remove the bias of arbitrary start or end dates. For long-term investors, this provides a more realistic picture of a fund’s ability to perform across market cycles.
In short, rolling returns offer a more dependable lens for judging performance consistency, helping investors make informed decisions.
Radhika Gupta, Managing Director and CEO of Edelweiss Mutual Fund, has expressed concerns over the prevalent use of 'point-to-point return' as a metric for assessing mutual fund performance. She cautioned investors about relying on this method, emphasising its potential to distort a fund's historical performance. Gupta points out that many websites dedicated to mutual fund analytics rely heavily on discrete point-to-point returns.
However, she argued that this metric is "broken" because it can be overly influenced by one exceptional or poor year, thus skewing the overall assessment of the fund's history. This critique highlights a significant issue in how mutual funds are evaluated in the current market.
Gupta advocated for an alternative approach, suggesting that rolling returns offer a more reliable measure of a fund's consistency over time. Unlike point-to-point returns, which only consider a specific timeframe, rolling returns take into account the performance of a fund across various periods, thereby providing a more comprehensive picture.
She explained that rolling returns can better illustrate a fund's stability by showing the returns generated over different timeframes, such as three or five years, which can include investments made at different points in time. This method provides investors with insight into the fund's performance over a longer duration, rather than just a snapshot.
"Most websites that do MF analytics focus on discrete point to point returns. I have said time and again, this is a broken metric because one good year or bad year colours the entire history. What matters are Rolling Returns — they show how consistent a fund has been over time, not just at one point. They represent the experience a cohort of investors have had over 3Y or 5Y," Gupta wrote on X.
To illustrate the superiority of rolling returns, Gupta gave an example: if an investor examines a fund's five-year rolling returns from 2010 to 2020, it calculates the returns from each day or month within that decade for the subsequent five years. This approach offers a broader perspective on the fund's performance, revealing how it has fared over time rather than focusing on a single period. This method also levels out fluctuations caused by temporary market conditions, ultimately presenting a more accurate and dependable evaluation of a fund's performance.
In alignment with this philosophy, Edelweiss Mutual Fund has incorporated rolling return data into its fund pages. This addition aims to equip investors with better tools for evaluating mutual funds, allowing them to make more informed decisions based on the fund's reliability and consistency.
Gupta expressed hope that other mutual fund platforms will adopt similar practices, enabling investors to focus on long-term stability rather than short-term gains or losses. By prioritising rolling returns, Edelweiss Mutual Fund seeks to enhance the decision-making process for its investors, steering them away from potentially misleading metrics.
Understanding rolling returns
Understanding rolling returns is crucial for investors seeking a clearer, more consistent view of mutual fund performance over time. Unlike fixed-date returns, which show gains or losses from a single point (for example, April 1, 2015, to April 1, 2025), rolling returns measure returns generated over overlapping periods within a specific time frame. This helps investors assess how consistently a fund has performed, regardless of market timing.
For instance, suppose you’re evaluating a mutual fund's 3-year rolling returns over a 10-year period (2015–2025). Instead of just looking at returns from 2015 to 2018 or 2022 to 2025, you would calculate the 3-year return for every single day, week, or month starting in 2015 and ending in 2022. So, returns would be measured for 2015–2018, 2016–2019, 2017–2020, and so on.
This gives you multiple data points—instead of just one—to see how often the fund has delivered strong, average, or weak returns. If the fund consistently delivers strong 3-year rolling returns across most time periods, it’s a sign of stable and reliable performance, even across volatile markets.
Why it matters: Rolling returns smooth out short-term market fluctuations and remove the bias of arbitrary start or end dates. For long-term investors, this provides a more realistic picture of a fund’s ability to perform across market cycles.
In short, rolling returns offer a more dependable lens for judging performance consistency, helping investors make informed decisions.