VIAC calculates the time-weighted return (TWR), which can sometimes be tricky to interpret (see Academy).

If you own several portfolios, you may have a total return across all portfolios that does not have to lie between the individual portfolio returns. This is anything but intuitive, but can be explained with the following example:

We have two portfolios. In period 1 we have CHF 900 on portfolio 1 and CHF 100 on portfolio 2 (the green area in the background reflects the share of portfolio 1 and is correspondingly larger). Portfolio 1 achieves a return of 3% and portfolio 2 a return of 1%, which results in a weighted total return of 2.8% – in period 1 the total return is therefore dominated by portfolio 1 due to the distribution of assets. At the beginning of period 2, we make a deposit of CHF 8’000 on portfolio 2, which exactly reverses the distribution of assets (now about 90% of the assets are on portfolio 2). Portfolio 1 generates a return of 1% in period 2 and portfolio 2 a return of 5%. In total, we achieve a weighted total return of 4.6% in period 2, as most of the assets are now in portfolio 2.

Portfolio 1 therefore returned better in period 1, portfolio 2 better in period 2. Over both periods we receive a return of around 4% for portfolio 1 and around 6.1% for portfolio 2. In total across both portfolios and both periods, however, we achieve a total return of around 7.5%. This is because the deposit on portfolio 2 came at exactly the right time. Due to the large deposit at the beginning of period 2, the distribution of assets has reversed, resulting in the total return in period 2 being dominated by portfolio 2.

**Conclusion**

Depending on the timing of the payments, the total return can therefore be less intuitive in comparison to the individual portfolio returns. This effect is possible with both good and bad timing.