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Drawdown Definition

A drawdown is the maxinimum percentage loss from a hedge fund. This is calculated by subtracting the lowest value from its peak net asset value.

drawdown, max drawdown, hedge fund max drawdown, drawdown calculationYou will often here to this a fund's max draw down over 5 years or max drawdown since inception. Some great low volatility funds will have max draw downs of only 3, 5, or 7% while others will have 10 or 20% drawdown figures. Sometimes this is due to the nature of their strategy, other times it can show that they have slipped at least once in moving the portfolio out of harms way or building in certain stop losses or hedged positions. All of this depends on the strategy at hand.

- Richard

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