Slippage is the difference between expected execution price and realized execution price. For short-term strategies where durations are limited and turnover can be elevated, understanding slippage is essential to assessing net returns. KRAT measures slippage at the trade level and aggregates it across the mandate to show realized cost versus implementation expectations. We evaluate slippage by instrument, counterparty, and execution venue to identify systematic sources of cost and to refine execution protocols. Our goal is to reduce hidden implementation leakage and to present transparent net outcomes to clients.

Benchmarking and metrics

We use a combination of reference ticks, time-weighted benchmarks, and realized spread analysis as appropriate for instrument type. For highly liquid cash instruments, mid-price references and short pre-trade windows are suitable. For less liquid instruments, we apply post-trade reconstruction to compare executed prices with observable trade prints in similar market conditions. Key metrics include average slippage per trade, slippage as a percentage of notional, and distributional statistics to capture tail events. These metrics inform both operational changes and governance triggers.

Incorporating slippage into performance reporting

KRAT integrates slippage into periodic performance reporting so clients see gross returns, transaction costs, and net returns in a single view. We provide contextual notes explaining material slippage events and their drivers. When slippage exceeds predefined thresholds, the team initiates a review that may lead to changes in execution counterparties, altered trade sizing, or modified timing strategies. Transparent reporting builds trust and helps clients understand tradeoffs between immediacy, liquidity, and cost.

If you would like a customized slippage analysis for your mandate or a demonstration of our execution reporting, contact our trading and performance team to arrange a review.