Maximum Adverse Excursion

Name: Maximum Adverse Excursion reference dataset
Creator: Know Your PMS

Published 2026-01-21. Last updated 2026-04-17. Editorial review: Know Your PMS editorial standards. By Abhimanyu Kucheria for Know Your PMS.

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:

What it means (plain English)

Maximum adverse excursion measures the worst intra-trade drawdown—the most a position went underwater before exit or recovery. Used heavily in systematic trading; discretionary PMS can analyze MAE on disclosed holdings history.

Low MAE with good returns suggests tight risk control or short holding periods. High MAE with good returns suggests riding pain for thesis—common in Indian multi-bagger small-cap stories.

MAE informs position sizing and stop-loss philosophy. Managers who say 'we average down' should show MAE distribution—unlimited MAE names occasionally blow up (corporate governance failures).

Factsheets rarely publish MAE. Ask in diligence: typical drawdown on new positions before working, largest MAE on winners vs losers. MAE complements hit rate and profit factor.

Worked example (Indian PMS scenario)

A PMS bought Stock X at ₹1,000; it later rallied to ₹1,450 (+45% closed trade). MAE: lowest price while held was ₹820 (−18% intra-trade). Another trade: bought ₹2,000, sold ₹2,100 (+5%) but MAE −35%—a winner on paper that nearly stopped out.

Aggregate MAE across 40 live trades: average −14% before winners resolve. If the manager's stop discipline claims −12% max loss per idea, MAE distribution exposes breaches—three trades beyond −25% drove most drawdown.

For your ₹1 crore account, MAE culture matters more than hit rate. Managers who let losers run to −40% need fatter winners to compensate; ask for MAE histograms in due diligence, not just closed P&L.

Why it matters for PMS scheme selection

MAE reveals how much heat managers take on positions—critical for judging whether you can stomach their process.

See the complete PMS evaluation framework

Shows risk discipline at position level
Explains volatility within smooth NAV months
Differentiates tight traders vs deep value holders
Flags blow-up risk on high MAE losers
Supports conversation on stop-loss policy

How to interpret it (practical checklist)

Ask if manager tracks MAE internally
Request examples on top winners and losers
Compare MAE to stated risk management rules
Review holding period vs MAE tolerance
Check for averaging down on falling stocks
Cross-check MAE stories with governance exits
Align MAE profile with your loss aversion

Common pitfalls (how this gets misused)

Read our methodology for assumptions and limitations.

Expecting MAE on every retail factsheet
Confusing position MAE with portfolio MDD
Assuming low MAE always means skill
Ignoring survivorship in MAE anecdotes
High MAE value traps without exit discipline
Using MAE from backtest only

Related metrics to review together

Use this guide alongside these metrics to avoid one-number decision-making:

Browse all metrics

Related guides

FAQs

Is MAE relevant for long-only Indian PMS?

Yes for understanding position-level pain. Long-only does not mean low MAE—concentrated bets can sit 30% underwater for quarters.

How does MAE relate to max drawdown?

MDD is portfolio peak-to-trough; MAE is per-position underwater path. Many high MAE positions can compound into portfolio MDD if correlated.

Can investors compute MAE themselves?

Only with trade-level or holding-level data over time—rare publicly. Rely on manager transparency in institutional due diligence.

Next: How to compare PMS schemes · Compare schemes · All guides

Frequently asked questions

Is MAE relevant for long-only Indian PMS?: Yes for understanding position-level pain. Long-only does not mean low MAE—concentrated bets can sit 30% underwater for quarters.
How does MAE relate to max drawdown?: MDD is portfolio peak-to-trough; MAE is per-position underwater path. Many high MAE positions can compound into portfolio MDD if correlated.
Can investors compute MAE themselves?: Only with trade-level or holding-level data over time—rare publicly. Rely on manager transparency in institutional due diligence.