How we calculate and annualize GRANITE’s Money Market Fund returns

At GRANITE, we calculate and present performance using methodologies that follow the
CFA Institute’s Global Investment Performance Standards (GIPS). These standards require
the use of time-weighted returns and specify that periodic returns must be geometrically
linked when measuring performance over longer horizons. In practice this means we
calculate the return for each sub period (for example each day), then multiply those sub
eriod return indices together to obtain a true time-weighted return for the whole period.

For a money market fund or cash strategy, this time-weighted return over a short horizon
is often called the holding period yield (HPY). To express that short period return as a
comparable annual rate, we use the effective annual yield (EAY), which is the standard
annualisation method taught in the CFA Program for money market instruments. EAY is
defined as:

EAY = (1 + HPY)^(365 / t) − 1

where t is the number of days in the holding period. This formula explicitly assumes
reinvestment and compounding of the short term return over a full 365 day year, which is
why it is the correct way to annualise the return on instruments that can be rolled over or
reinvested, such as money market funds.
Putting these two elements together, GRANITE’s methodology can be summarised as
follows:

• Compute daily time-weighted returns from the fund’s NAV, adjusting for any external cash flows.
• Geometrically link the daily returns to obtain the holding period yield over the chosen window
  (for example 7 days).
• Convert that holding period yield to an effective annual yield using the standard CFA formula
  EAY = (1 + HPY)^(365 / t) − 1

This approach is fully aligned with CFA Institute guidance: GIPS requires time-weighted,
geometrically linked total returns for performance reporting, and the CFA curriculum uses
the effective annual yield to annualize money market returns in a way that reflects
compounding. That is why the annualized figures you see in GRANITE’s app and
dashboards are based on the compounded return formula (for example (NAV_day 7 /
NAV_day 1)^(365 / 7) − 1), rather than a simple pro-rata scaling of short-term returns.

The same method we describe above can be applied directly to the daily NAVs that
GRANITE publishes on its website (granite.eg). You can replace them with any two dates
and NAVs taken from the published NAV table.

• NAV on 13 October 2025: 1.00000 EGP per unit
• NAV on 20 October 2025: 1.00376 EGP per unit

1) Holding period yield over the 7 day window:
HPY_7d = (NAV_20 Oct / NAV_13 Oct) − 1

Numerically: HPY_7d = (1.00376 / 1.00000) − 1 ≈ 0.00376, or about 0.376% over the 7
day period.

2) Effective annual yield using the CFA EAY formula:
EAY = (1 + HPY_7d)^(365 / 7) − 1

Plugging in HPY_7d = 0.00376 gives:

EAY ≈ (1 + 0.00376)^(365 / 7) − 1 ≈ 0.21614, or about 21.6% per year.
This is the annualised, compounded return implied by a 0.376% gain over a 7-day period,
assuming the same rate is sustained and reinvested throughout the year.

Key references and links

1. CFA Institute – Overview of the Global Investment Performance Standards (GIPS) Explains that the GIPS standards mandate specific calculation methodologies and that time-weighted returns are required for performance reporting.
2. CFA Institute / GIPS – Guidance Statement on Calculation Methodology Section 2.A.2: "Time-weighted rates of return that adjust for external cash flows must be used. Periodic returns must be geometrically linked."
3. CFA Institute / GIPS – GIPS Handbook (2nd edition) Reiterates the requirement to use time-weighted rates of return and geometrically linked periodic returns for compliant performance presentation.
4. Soleadea – Money Market Yields (CFA Exam cheat sheet) Summarises the CFA curriculum definition of Effective Annual Yield for money market instruments and gives the standard formula: EAY = (1 + HPY)^(365 / t) − 1