Hey L3 candidates, I’ve been doing practice problems and practice tests and saw a question about the Modified Dietz Method which is completely foreign to me. I read the CFAI 2020 materials cover to cover and I generally know if I’ve seen a term and just can’t remember it or if I’ve straight up never seen it before. I figured this was part of the old curriculum since I was doing practice tests from previous years, then I just saw a question about it on the CFA ecosystem q-bank and it freaked me out. I searched through all of my materials and can’t find where this is covered. Can anybody give me a tip as to what book/reading/section I can find it? Thanks.
Modified Dietz is an Arithmetic way of calculating time weighted rate of return which negates the effect of timing of the cashflows so as to avoid the fund manager being rewarded or penalized for the investers decision of adding or withdrawing cashflows from the funds or portfolios. It is used in traditional fund setup where fund manager does not control the timing of the cashflows.