Methodology

Time-Weighted Return (TWR)

NakedPnL uses the Time-Weighted Rate of Return (TWR) to measure portfolio performance. TWR isolates investment skill from the timing and size of deposits and withdrawals, making it the industry standard for comparing managers on equal footing. This is the same methodology used by institutional fund managers to report composite returns.

How It Works

Each day, the system records a Net Asset Value (NAV) snapshot of every connected portfolio. The daily return is calculated from consecutive NAV readings. When a cash flow (deposit or withdrawal) occurs during the day, the system uses the Start-of-Day (SOD) convention: the cash flow is assumed to occur at the opening of the period, and the denominator is adjusted accordingly. Individual daily returns are then geometrically chain-linked to produce cumulative performance over any measurement window.

The Formula

Cash Flow Convention

NakedPnL uses the Start-of-Day (SOD) convention. When a deposit or withdrawal is detected, it is treated as if it arrived at the beginning of the day. This means the cash flow is added to the prior-day NAV before computing the current-day return. SOD is a conservative approach that slightly understates returns on deposit days and slightly overstates returns on withdrawal days, but produces consistent and comparable results across all portfolios.

What Counts as a Cash Flow

Data Sources

NakedPnL connects to exchanges and brokerages via read-only API keys. These connections can only read account data; they cannot place trades, withdraw funds, or modify account settings.

Snapshots are taken on a fixed schedule to ensure consistency across all tracked portfolios:

Snapshot values include total equity, unrealized P&L, margin balances, and open positions. Deposits and withdrawals are detected by comparing the change in equity against the calculated P&L for that period.

Verification and Integrity

Every data point ingested by NakedPnL is appended to an internal log. Each record is assigned a deterministic hash that references the previous record, forming a hash chain. If any historical entry were to be altered, the chain would break, and the system would flag the discrepancy during routine automated checks.

Automated Checks

• Hash chain continuity is verified on every append operation.
• NAV values are checked for anomalous jumps that could indicate data corruption.
• Cash flow detection is cross-referenced against exchange transaction history.
• Duplicate snapshots or missing days are flagged for manual review.

What “Verified” Means

When a portfolio on NakedPnL carries the “Verified” label, it means the performance data has been reviewed and approved by the NakedPnL team. This is a team-reviewed process, not a third-party audit. NakedPnL does not hold any certifications from external auditing bodies, and the “Verified” status should not be interpreted as a guarantee of accuracy or future results.

Known Limitations

Transparency requires acknowledging the boundaries of any methodology. The following limitations apply to all performance data on NakedPnL:

• TWR vs. MWR: Time-Weighted Return isolates manager skill but does not reflect the actual dollar return experienced by the investor. Money-Weighted Return (MWR / IRR) accounts for cash flow timing and size, and may differ significantly from TWR for portfolios with large or frequent deposits/withdrawals.
• Snapshot timing variance: Crypto snapshots are taken at 00:00 UTC. IBKR snapshots are taken after US market close. Intraday price movements between these times are not captured.
• Missed days: If the system fails to capture a snapshot (API outage, maintenance window), the affected day is interpolated using the next available reading. Interpolated days are flagged in the data.
• Unrealized P&L: NAV snapshots include unrealized gains and losses at the time of the snapshot. These values may change significantly before positions are closed.
• Currency conversion: Multi-currency portfolios are converted to USD at the snapshot-time exchange rate. FX fluctuations between snapshots are not separately attributed.
• GIPS methodology: Returns are calculated using the time-weighted return methodology required by GIPS for portfolio-level performance. NakedPnL has not undergone a GIPS verification and no claim of GIPS compliance is made.

Portfolio Size Classification

Portfolios on the registry are grouped into size tiers rather than displaying exact account values. This protects user privacy while still providing context for performance comparison. A $5,000 portfolio generating 200% returns operates in a fundamentally different environment than a $50M fund doing the same.

Tier classification is determined at the time of the most recent snapshot and may change as account values fluctuate. Exact portfolio values are never displayed publicly.