Relative Return

Relative Return

The return that an asset achieves over a period of time compared to a benchmark. The relative return is the difference between the absolute return achieved by the asset and the return achieved by the benchmark.

Notes:

Relative returns are most often used when reviewing the performance of a mutual fund manager. Because holders of mutual funds are charged management fees, they expect a manager to achieve returns higher than the benchmark index. For example, if the fund you are holding achieves an absolute return of 12% over the past year while the benchmark index provides a return of 15%, then the fund has achieved a relative return of -3% for the year.

See also: Absolute Return, Benchmark, Expense Ratio, Hedge Fund, Index, Index Fund, Market Neutral, Mutual Fund