J Curve

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Adverse selectionThe risk of ending up with the wrong manager — picking a fund on a track record or a forward-looking statement that does not predict performance, and getting sub-optimal returns or moral hazard instead.
• AlphaThe return a fund earned above what its beta and the benchmark say it should have earned — the slice of performance left over once the market has been given credit for its share.
• BenchmarkThe independently published index a scheme's performance is measured against, chosen to match its investment objective, asset allocation and strategy, and disclosed in the Scheme Information Document.
• CAGRThe single smoothed annual rate at which a starting value would have to grow, compounding each year, to reach the ending value over a given period.
• Catch-up RateThe rate at which residual profits go to the manager after investors have received their capital and preferred return, until the manager holds its agreed share of total profits.
• ClawbackAn investor right to recover carried interest already paid to the manager on early successful exits, when later failed investments mean the manager was overpaid across the fund's whole life.