12 May 2026
What a drawdown figure actually measures
Peak-to-trough is simple to quote and easy to misuse. Here is how we define it on client books, and where people usually talk past each other.
When someone says “we had a twenty percent drawdown,” they may mean three different things: the worst mark-to-market decline from a previous high, the decline from the start of a calendar year, or the decline versus a benchmark that itself fell. In our reviews we pin the definition before the arithmetic.
Peak to trough, on your dates
For a private book we mark a peak as the highest portfolio value in the agreed look-back, using the valuation dates available from custodians. The trough is the lowest subsequent value before a new high is made. The percentage is trough divided by peak, minus one. Recovery length is the time from trough back to the prior peak level — if it has recovered at all.
Why calendar years mislead
A January-to-December number can hide a deeper path that started the previous autumn. Clients who felt 2022 “twice as bad as the annual figure” were often remembering an intra-year peak that never appears in a year-end letter.
Cash flows
Lodgements and withdrawals change the path. We note material cash flows beside the drawdown path so a contribution during a trough is not mistaken for investment recovery. Where data is messy, we say so in the report rather than force a single clean curve.
If you want this reconstruction done on your own statements, see our portfolio risk & drawdown review.