Up-Capture / Down-Capture Ratio
Up-Capture Ratio measures what % of benchmark gains a fund captures during rising markets. Down-Capture Ratio measures what % of benchmark losses it suffers during falling markets. The ideal manager has high up-capture and low down-capture. Formula:
Up-Capture Ratio measures what % of benchmark gains a fund captures during rising markets. Down-Capture Ratio measures what % of benchmark losses it suffers during falling markets. The ideal manager has high up-capture and low down-capture.
Formula: Up-Capture = (Fund return in up months ÷ Benchmark return in up months) × 100. Down-Capture computed symmetrically using down months.
INR example: A Nifty 50 large-cap active fund posts Up-Capture = 95% (catches 95% of Nifty’s gains) and Down-Capture = 80% (only suffers 80% of Nifty’s losses) over 5 years. Net capture spread = 15% — the manager genuinely adds value across regimes. A spread > 10% is rare and indicates real skill.
When to use: Especially valuable for hybrid, balanced advantage, and dynamic asset allocation funds — their thesis is downside protection, so down-capture should be markedly below 100%.
SEBI note: Not in mandatory disclosures; AMCs that voluntarily publish capture ratios in factsheets are usually proud of the numbers. Verify on 5-yr+ data covering at least one drawdown cycle.
Related terms: Alpha, Beta, Risk-adjusted Returns.