TotalReturnIndizes

TotalReturnIndizes are financial indices that measure the total return of a defined set of assets by including income distributions such as dividends and coupons, assuming those distributions are reinvested. This contrasts with price indices, which track only changes in asset prices. Total return indices provide a more comprehensive view of investment performance, reflecting both capital appreciation and income generation over time.

Calculation and conventions: For equities, distributions are treated as if reinvested at the ex-dividend date, effectively increasing the number of shares in the index. For fixed income, coupons are assumed reinvested according to a specified yield curve. Some providers publish gross total return indices (pre-tax, pre-fees) and net total return indices (after withholding taxes). The base date and index level conventions (e.g., base value 100 or 1000) are defined by the index rulebook. In practice, different providers may apply slightly different reinvestment rules and treatment of corporate actions, requiring careful cross-provider comparison.

Usage and limitations: TotalReturnIndizes are widely used as benchmarks for fund and portfolio performance, as performance attribution can separate price and income effects. They can be not directly investable; investable variants exist that aim to track the same total return exposure with a fund or ETF. Limitations include the reinvestment assumption, tax treatment, currency effects, and possible discrepancies in dividend timing and corporate actions across markets.

Examples: S&P 500 Total Return Index, MSCI World Total Return Index, FTSE All-World Total Return Index.