Capture Ratios Guide
Published 2026-02-11. Last updated 2026-04-17. Editorial review: Know Your PMS editorial standards. By Abhimanyu Kucheria for Know Your PMS. Editorial team · Methodology.
Topic cluster: Risk & Return Metrics
Headline CAGR hides the journey. This cluster explains drawdowns, volatility, rolling returns, capture ratios, and risk-adjusted measures — with Indian PMS factsheet context.
Pillar guide: Max Drawdown Explained
More in this cluster:
- Max Drawdown Explained
- Volatility Explained
- Rolling Returns Guide
- Calmar Ratio Guide
- Information Ratio Guide
What it means (plain English)
Capture ratios compare portfolio returns to benchmark returns in two buckets: periods when the benchmark was up (up-capture) and when it was down (down-capture). If Nifty rises 10% in a month and the PMS rises 12%, up-capture is 120%. If Nifty falls 10% and the PMS falls 7%, down-capture is 70%.
Idealized asymmetric managers target up-capture above 100% and down-capture below 100%. In Indian PMS land, few sustain that over decade-long samples—but spreads matter. A large-cap value PMS with 95% up / 85% down offers a different contract than a momentum sleeve at 130% / 110%.
Capture ratios are usually computed on monthly data vs a stated benchmark. They relate closely to beta but are more intuitive for HNIs: 'In bad months, do I lose more or less than Nifty?'
Watch for sample size. Three bad months with lucky down-capture mean little. Aggregate across 2018, 2020, 2022-style windows. Also check if cash or options hedges depressed down-capture in one crash but are not repeatable.
Worked example (Indian PMS scenario)
Over 36 months, Nifty 50 gained 42% in up months and lost 11% in down months (sum of monthly positives/negatives). PMS M gained 50% in up months (up-capture 119%) and lost 7% in down months (down-capture 64%). PMS N gained 55% in up months (131%) and lost 14% in down months (127%).
On ₹1 crore, N wins bull markets but bleeds in corrections. In Oct 2023's −2.5% Nifty month, M lost roughly ₹64 lakh × 2.5% ≈ ₹1.6 lakh while N lost ≈ ₹3.2 lakh. Compounded over four bear clusters, that gap funds a year of fixed fees.
Capture ratios translate beta into behaviour investors feel. Pair them with your withdrawal plan: retirees should target down-capture under 80%; aggressive accumulators may accept 100%+ if up-capture exceeds 110% with acceptable max drawdown.
Why it matters for PMS scheme selection
Capture ratios translate market jargon into bull/bear behavior you can feel—essential when marketing decks only show CAGR.
See the complete PMS evaluation framework
- Shows asymmetry more clearly than beta alone
- Helps conservative investors find true downside managers
- Reveals aggressive managers riding beta in rallies
- Pairs with calendar years for regime stories
- Supports fee justification when down-capture is genuinely low
How to interpret it (practical checklist)
- Confirm benchmark and monthly data frequency
- Require 36+ months including selloffs
- Compare up and down capture together, never one alone
- Segment by year to see regime dependence
- Check cash % in down months vs up months
- Cross-validate with max drawdown and Calmar
- Compare capture vs stated investment philosophy
Explore related metrics · Compare PMS schemes · Up Capture
Common pitfalls (how this gets misused)
Read our methodology for assumptions and limitations.
- Celebrating high up-capture without checking down-capture
- Using quarterly data that smooths crash months
- Ignoring option hedges that expire after one quarter
- Comparing capture across different benchmarks
- Short track records with one lucky crash
- Assuming low down-capture means low long-term return
Related metrics to review together
Use this guide alongside these metrics to avoid one-number decision-making:
Related guides
- Rolling Returns Guide
- Information Ratio Guide
- Calmar Ratio Guide
- Ulcer Index Guide
- Profit Factor Guide
See also
- Bull vs bear market performance
- Downside protection in crashes
- Beta-adjusted returns
- Drawdown clustering
FAQs
What down-capture should a conservative PMS target?
Conservative large-cap mandates often aim for 70–90% down-capture vs Nifty with acceptable up-capture near 80–95%. The exact trade-off should match your IPS. Verify across multiple crashes, not one.
How are capture ratios related to beta?
High beta tends to raise both captures above 100%, but stock selection skews them apart. Capture ratios are empirical; beta is model-based. Use both—divergence hints at timing or option overlays.
Do Indian PMS factsheets always publish capture ratios?
Many quality managers do in institutional decks; monthly retail factsheets may omit them. Request from relationship managers or derive from monthly performance on comparison platforms.
Next: How to compare PMS schemes · Compare schemes · All guides
Frequently asked questions
- What down-capture should a conservative PMS target?
- Conservative large-cap mandates often aim for 70–90% down-capture vs Nifty with acceptable up-capture near 80–95%. The exact trade-off should match your IPS. Verify across multiple crashes, not one.
- How are capture ratios related to beta?
- High beta tends to raise both captures above 100%, but stock selection skews them apart. Capture ratios are empirical; beta is model-based. Use both—divergence hints at timing or option overlays.
- Do Indian PMS factsheets always publish capture ratios?
- Many quality managers do in institutional decks; monthly retail factsheets may omit them. Request from relationship managers or derive from monthly performance on comparison platforms.