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HYBRID METHODOLOGIES

In practice, many managers use neither true time-weighted nor money-weighted calculations exclusively but rather a hybrid combination of both.
If the standard period of measurement is monthly, it is far easier and quicker to calculate the modified (or even simple) Dietz return for the month and then chain link the resulting monthly returns. This approach treats each monthly return with equal weight and is therefore a version of time weighting. All of the methods mentioned previously can be calculated for a specific time period and then chain linked to create a time-weighted type of return for that time period.

Linked modified Dietz

Currently, the standard approach for institutional asset managers is to chain link monthly modified Dietz returns. Often described as a time-weighted methodology, in fact it is a hybrid chain-linked combination of monthly money-weighted returns. Each monthly time period is given equal weight and therefore time weighted, but within the month the return is money weighted.

  

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