Gross return

What an investment produced before any fees, costs or tax were taken out.

Example

A fund whose holdings rose 9.00% reports a 9.00% gross return even though its investors received less.

Important

Almost every published return, target and track record is gross of something. The useful question is never whether a figure is gross but which specific costs it is gross of.

Related terms

• Net return — What actually reached the investor after fees and costs were deducted. Net of tax as well, if stated.
• Fee drag — The compounding cost of fees over time, which is far larger than the fee's annual percentage suggests on its own.
• After-tax return — The return that remains once the tax on it has been paid. The only version of a return an investor can actually spend.

Lessons that explain it

• A fund must return far more than its investments cost to deliver its target to investors — Fees, carried interest and reserves mean a venture fund's portfolio must earn a much higher gross multiple than the net multiple its investors receive. Working backwards shows what a fund needs from its best companies. (12 min)
• Fee drag: why a small percentage becomes a large number — A recurring fee is not a one-off cost. It is removed every year, and the money removed stops compounding - which is why the damage over a long hold is far larger than the fees themselves. (12 min)
• One company usually carries the whole fund — Venture returns come from a handful of outliers, and the fund's own fees and carry take a large slice before the LP sees anything. (13 min)

All 578 terms in the Investing glossary