What is Drawdown Recovery?
Drawdown recovery analysis extends Max Drawdown by tracking the full lifecycle of the worst decline: when the peak occurred, when the trough was hit, when (or if) the fund recovered to its previous peak, and how many days the recovery took.
Max Drawdown tells you the depth of the worst fall. Recovery analysis tells you the full story - including how long investors had to wait to break even.
Key Dates
- Peak Date: The date when the NAV hit its highest point before the drawdown began.
- Trough Date: The date when the NAV hit its lowest point during the drawdown (the bottom).
- Recovery Date: The first date when the NAV returned to or exceeded the peak NAV. If the fund has not yet recovered, this is shown as "Still Underwater."
- Recovery Days: Calendar days from the trough date to the recovery date. This measures how long it took to climb back from the bottom to the previous peak.
How We Compute It
2. Compute daily drawdown: (NAV / running_max - 1) × 100
3. Find the date with the most negative drawdown → Trough Date
4. The running maximum on that date's drawdown start → Peak Date (and Peak NAV)
5. Scan forward from Trough Date for the first date where NAV ≥ Peak NAV → Recovery Date
6. Recovery Days = Recovery Date − Trough Date (calendar days)
7. If no such date exists within the period → "Still Underwater"
Worked Example
COVID Crash Recovery - Large Cap Fund
Peak NAV: 320.50 on Jan 14, 2020
Trough NAV: 198.20 on Mar 23, 2020
Max Drawdown: (198.20 / 320.50 - 1) × 100 = -38.2%
Recovery Date: Nov 24, 2020 (first day NAV ≥ 320.50)
Recovery Days: 246 calendar days (Mar 23 → Nov 24)
An investor who bought at the peak waited about 10 months to break even. The drawdown itself took only 69 days (Jan 14 → Mar 23), but recovery took more than 3× longer.
Still Underwater
Peak NAV: 45.80 on Sep 15, 2024
Trough NAV: 34.20 on Dec 10, 2024
Max Drawdown: -25.3%
Recovery Date: Still Underwater
As of the latest NAV date, the fund has not yet returned to its Sep 2024 peak. Recovery days are not shown - the drawdown is ongoing.
How to Interpret
- Recovery days matter as much as depth. A -20% drawdown that recovers in 30 days is far less painful than a -15% drawdown that takes 18 months to recover.
- Asymmetry of losses: A -50% loss requires a +100% gain to break even. This is why deep drawdowns can take years to recover even in a strong market.
- "Still Underwater" is a red flag for the selected period - it means the fund's max drawdown has not yet been recovered. This is common in shorter evaluation periods or during active bear markets.
- Compare across funds: Two funds with the same -30% max drawdown may have very different recovery profiles. The one that recovered in 4 months is far more resilient than the one still underwater after a year.
Relationship to Other Metrics
- Max Drawdown: Captures depth only. Recovery adds the time dimension.
- Ulcer Index: Incorporates both depth and duration of all drawdowns (not just the max). Recovery analysis focuses on the single worst event.
- Calmar Ratio: Uses Max Drawdown depth in its denominator. A fund with fast recovery may still have a poor Calmar if the drawdown was deep.
Important Notes
- Recovery is measured from trough to the first break-even date, not from peak.
- Recovery days are calendar days, not trading days.
- The analysis is scoped to the selected evaluation period. A drawdown at the very end of the period will likely show as "Still Underwater" simply because there isn't enough subsequent data.
- Only the max drawdown event is analyzed for recovery. Secondary drawdowns are not tracked individually.
Related metrics
More Advanced Risk methodology from the MFPRO analytics tool: