Portfolio turnover

Turnover shows how actively a portfolio is traded. The common measure divides the lesser of purchases and sales over the period by portfolio value, often the average for the period. Using the lesser figure stops new money and withdrawals inflating the result.

Policies limit turnover to control costs, with wording such as “annual turnover below 50%”. In UK pension schemes, the statement of investment principles must cover how portfolio turnover costs are monitored. It must also say how a targeted turnover or turnover range is defined and monitored, or explain why not.

Acclimetry’s turnover limit measures from the transaction record over a governed window, as a turnover ratio, purchase ratio or trade count. Example: purchases of 300 and sales of 200 in a 90-day window over a 1,000 portfolio give 20%, inside a 25% cap. Without the transaction record, turnover is not evaluated rather than read as zero.