Before you think “oh, here he goes again” please give me a second to explain. Okay, yes, it’s true: I’ve been beating this to death (and will continue to, but not right now).

I was sent the following question from a client:

Some background: the writer is speaking about a client’s account, where they are reporting to the client, and are using the concept of a “composite” to pool the client’s accounts together.

In this case, unlike with time-weighting, we would aggregate the accounts (starting and ending market values, as well as cash flows). We then calculate an IRR across this aggregate account. I would not encourage asset weighting individual IRRs, though to confess I haven’t played around with it; my “gut” is speaking here.

And so, there is a place for aggregation: for IRRs, when we are reporting to a client about their return!