Ulcer Index Guide
Published 2026-03-18. 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:
- Max Drawdown Explained
- Volatility Explained
- Rolling Returns Guide
- Calmar Ratio Guide
- Information Ratio Guide
What it means (plain English)
The Ulcer Index (UI) captures depth and duration of drawdowns—squaring drawdown % at each point, averaging, square-rooting. Unlike max drawdown alone, UI penalizes long underwater periods.
Higher UI = more ulcer-inducing path. Conservative HNIs may rank PMS by lower UI even if CAGR slightly lower—sleep-well metric.
Compute from monthly NAV like rolling drawdown. Less common than Sharpe on factsheets but derivable.
Pair UI with Calmar (return/MDD) and recovery time for full drawdown story.
Worked example (Indian PMS scenario)
Portfolio A: max DD −25%, one episode, fast recovery—Ulcer Index ~6. Portfolio B: max DD −22%, three slow episodes over 18 months—Ulcer Index ~11. Headline max DD favours B slightly; Ulcer favours A strongly.
On ₹1.5 cr, B's prolonged underwater periods coincide with ₹18 lakh school fee due—forced withdrawal at −15% from peak costs ₹2.25 lakh of permanent capital vs waiting at −5%.
Ulcer captures depth × duration. Retirees and goal-based investors should rank finalists by Ulcer, not CAGR alone. Pair with rolling drawdown charts for visual confirmation.
Why it matters for PMS scheme selection
Ulcer Index answers what max drawdown misses: how long and how deep the pain lasted, combined.
See the complete PMS evaluation framework
- Penalizes prolonged underwater periods
- Aligns metric with HNI drawdown psychology
- Complements max drawdown and Calmar
- Useful for conservative mandate ranking
- Derived from same NAV as other metrics
How to interpret it (practical checklist)
- Calculate UI from 36+ monthly NAVs
- Compare UI across peer PMS
- Plot UI alongside rolling drawdown
- Note UI spikes in liquidity crunches
- Use net NAV series
- Rank with CAGR for efficiency trade-off
- Document UI at each annual review
Explore related metrics · Compare PMS schemes · Ulcer Index
Common pitfalls (how this gets misused)
Read our methodology for assumptions and limitations.
- UI unknown so ignored entirely
- Short sample underestimating UI
- Comparing UI without matching mandates
- Low UI from equity-light portfolio surprise
- Single shallow drawdown vs long mild UI confusion
- Ignoring return level when UI low
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
- Capture Ratios Guide
- Profit Factor Guide
See also
FAQs
Ulcer Index vs max drawdown?
MDD is worst peak-trough; UI integrates path depth and time. Both useful—UI better for duration pain.
What UI is acceptable?
Compare within peer group—lower is calmer path. No universal cutoff.
Do Indian PMS publish Ulcer Index?
Rare. Compute from monthly performance or request analytics from platforms.
Next: How to compare PMS schemes · Compare schemes · All guides
Frequently asked questions
- Ulcer Index vs max drawdown?
- MDD is worst peak-trough; UI integrates path depth and time. Both useful—UI better for duration pain.
- What UI is acceptable?
- Compare within peer group—lower is calmer path. No universal cutoff.
- Do Indian PMS publish Ulcer Index?
- Rare. Compute from monthly performance or request analytics from platforms.