makeGrossReturns: Compute gross returns from net returns and a fee structure.
In gtog/dMisc: A Collection of Helper Functions for Doing Financial Data Analysis

Description Usage Arguments Value Examples

This function computes gross returns from a set of net returns and a specified fee structure. This is particularly important when factor modeling hedge fund returns. We generally don't want to model net returns. Rather, we want to model gross returns. The default for the function is a standard 2 expenses. The function also assumes a high water mark is in place such that performance fees are not accrued if current equity (as measured by cumulative wealth from the start of the series) is below the peak equity of the series. The default assumes monthly data.

1 2	makeGrossReturns(nr, mgmt.fee = 0.02, perf.fee = 0.2, highwater = TRUE, ann.exp = 0.0025, scale = 12)

`nr`	the net returns in xts format.
`mgmt.fee`	the annual managment fee, assumed to crystalize in the same frequency as `nr`. If nr is monthly, then mgmt.fee/12 will be deducted from each monthly return. Default is .02.
`perf.fee`	the percentage performance fee. As long as the fund is above high water mark when `highwater == TRUE` then this percentage will be deducted from all positive profits each period. Default is .20.
`highwater`	a flag indicating whether or not the fund has a high water mark. Default is TRUE.
`ann.exp`	the annual expenses of the fund passed through to investors. Default is 25 bps of annual expenses.
`scale`	a numeric value indicating the frequency of the data. Default is 12, indicating monthly return data. Use 4 for quarterly and so on.

an xts object representing the gross return series.

library(dMisc)
library(xtsExtra)
dts <- seq(Sys.Date()-2519, Sys.Date(), 1)
returns <- matrix(rnorm(2520),ncol = 1) / 100
ret.xts <- xts(returns, dts)
ret.gross <- makeGrossReturns(ret.xts, scale = 252)
head(cbind(ret.xts,ret.gross))