Capture ratios
Up-capture and down-capture measure how much of the benchmark's gains a fund captures vs. how much of its losses it absorbs.
Capture ratios split a fund's beta into two asymmetric halves: how the fund behaves in up markets versus down markets. A skilled active manager should capture more of the benchmark's gains and less of its losses — an asymmetry that produces compounding advantages over time.
What it measures
Up-capture ratio (UCR): During months when the benchmark posted a positive return, what fraction of that return did the fund capture?
Down-capture ratio (DCR): During months when the benchmark posted a negative return, what fraction of that loss did the fund absorb?
The ideal combination is UCR > 100 and DCR < 100 — the fund amplifies gains and mutes losses.
How it is computed
MintByte uses 3 years of monthly returns, separated into "up months" and "down months" for the benchmark:
UCR = (Geometric mean of fund returns in up-benchmark months /
Geometric mean of benchmark returns in up-benchmark months) × 100
DCR = (Geometric mean of fund returns in down-benchmark months /
Geometric mean of benchmark returns in down-benchmark months) × 100
Example: Over 36 months, the Nifty 50 had 22 positive months and 14 negative months.
- In positive months: benchmark geometric mean = +3.1%/month; fund = +3.5%/month → UCR = 113
- In negative months: benchmark geometric mean = −2.4%/month; fund = −1.9%/month → DCR = 79
This fund: UCR 113, DCR 79 — excellent asymmetry. It amplifies gains and softens losses.
The capture ratio (a single derived number) = UCR / DCR. Above 1.0 is good; above 1.2 is strong.
How to interpret
| UCR / DCR | Reading |
|---|---|
| UCR > 100, DCR < 100 | Ideal — captures more than benchmark gains, less than losses |
| UCR > 100, DCR > 100 | Aggressive — amplifies both up and down |
| UCR < 100, DCR < 100 | Defensive — mutes both up and down |
| UCR < 100, DCR > 100 | Worst case — gives up gains and amplifies losses |
An index fund has UCR ≈ 100 and DCR ≈ 100 by construction (minus TER drag). Active funds are evaluated on whether they beat this baseline asymmetrically.
Limitations + caveats
The split between up and down months is benchmark-dependent. A fund that outperforms in equity bull months might underperform in months where bonds rally — but if the benchmark is an equity index, those months may not appear in the "down" bucket. Capture ratios also depend heavily on the time window; a 1-year window can be dominated by a single market regime.
Related metrics
- Beta — the aggregate slope coefficient; capture ratios decompose it into up/down components.
- Alpha — measures overall excess return; high UCR + low DCR is one path to positive alpha.
- Max Drawdown — captures the deepest consequence of high DCR in extended down markets.
Sources
Monthly NAV and benchmark returns: AdvisorKhoj API. Benchmark assigned per SEBI category classification. Capture ratios computed monthly over trailing 36 months (minimum 18 months required, 24 recommended).