If a fund’s downside capture is 80 percent, it implies that if the market were to go down 10 percent, the fund would only go down 8 percent. If a fund’s downside capture is 120 percent, it implies that if the benchmark were to go down 10 percent, the fund would lose 12 percent, 20 percent more than the benchmark.
“Advisors may benefit by talking more to clients about what it means to take a conservative investment approach and about strategies to protect principal,” says Braley. “Conservative investors seeking capital preservation may focus on downside capture percentages that are negative or less than 100 percent, hoping to not lose money or to lose significantly less on the downside.”