Maximum drawdown is the largest peak-to-trough decline in a fund's NAV over a period, expressed as a percentage. It shows the worst loss an investor would have suffered buying at the top and selling at the bottom, and is a key measure of downside risk.
Drawdown is read together with recovery time, the period it took to regain the previous peak. A strategy with a 20% maximum drawdown that recovered in three months is very different from one that took two years.
Because performance fees are charged above a high-water mark, deep drawdowns also matter to the manager: no fee is earned until the loss is recovered.
Daily NAV series on POD give allocators drawdown statistics at daily granularity from the first dealing day. Past performance is not a reliable indicator of future results.
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