Drawdown

Drawdown refers to the decline in the value of an investment portfolio from its peak to its subsequent trough before a new peak is achieved. It is typically expressed as a percentage and measures the risk and volatility of an investment strategy. For family offices, drawdown is a critical performance metric as it highlights the potential downside risk and helps assess the resilience of the portfolio during market downturns. Managing drawdowns is essential to preserving wealth, maintaining liquidity, and ensuring the portfolio aligns with the family’s risk tolerance and long-term objectives. It also aids in evaluating investment managers and strategies.