Capture Ratio summarises both the Upside Capture Ratio and Downside Capture Ratio together — a fund with a high upside capture and low downside capture is the ideal active manager.
The Capture Ratio is not a single number but refers to the pair of: Upside Capture Ratio (how much of market gains the fund captures) and Downside Capture Ratio (how much of market losses the fund absorbs). The 'net' capture ratio concept — Upside Capture ÷ Downside Capture — gives a single score: above 1.0 means the fund gains more than it loses relative to the benchmark, indicating positive active management. For example, Upside Capture 110% ÷ Downside Capture 85% = 1.29 — a very favourable ratio.
Capture Ratio is the scorecard of a fund's 'heads I win more, tails I lose less' ability. If a fund captures 115% of every market rally but only absorbs 80% of every crash, it's a great active manager — investors get amplified gains and cushioned losses. Calculate net Capture Ratio = Upside ÷ Downside: above 1.0 is good, above 1.2 is excellent. A fund that scores 120% upside AND 120% downside is just a leveraged index — no skill involved.
Upside Capture = Fund avg return in benchmark-positive months ÷ Benchmark avg return × 100.
Downside Capture = Fund avg return in benchmark-negative months ÷ Benchmark avg return × 100.
Net Capture Ratio = Upside Capture ÷ Downside Capture.
Net > 1.0: fund outperforms benchmark asymmetrically — more gain, less pain.
Net < 1.0: fund captures less upside than downside — unfavourable active management.